MEDIATEK INC. and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2017 and 2016 (Amounts in Thousands of New Taiwan Dollars)

English Translation of a Report and Financial Statements Originally Issued in Chinese

MEDIATEK INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS WITH REPORT OF INDEPENDENT ACCOUNTANTS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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REPRESENTATION LETTER

The entities included in the consolidated financial statements as of December 31, 2017 and for the year then ended prepared under the International Financial Reporting Standards, No.10 are the same as the entities to be included in the combined financial statements of the Company, if any to be prepared, pursuant to the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises (referred to as “Combined Financial Statements”). Also, the footnotes disclosed in the Consolidated Financial Statements have fully covered the required information in such Combined Financial Statements. Accordingly, the Company did not prepare any other set of Combined Financial Statements than the Consolidated Financial Statements.

Very truly yours,

MediaTek Inc.

Chairman: Ming-Kai Tsai

March 23, 2018

- 2 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2017 and 2016 (Amounts in thousands of New Taiwan Dollars)

ASSETS Notes December 31, 2017 % December 31, 2016 % Current assets Cash and cash equivalents 4, 6(1) $ 145,338,376 37 $ 140,560,858 38 Financial assets at fair value through profit or loss-current 4, 5, 6(2) 724,507 - 1,970,502 1 Available-for-sale financial assets-current 4, 5, 6(3) 23,291,828 6 9,428,674 3 Debt instrument investments for which no active market exists-current 4, 6(5), 8 765,445 - 1,505,492 - Notes receivables, net 2,811 - 2,811 - Trade receivables, net 4, 5, 6(6) 16,892,585 4 20,477,995 6 Other receivables 6(6), 7 21,251,357 5 5,497,925 1 Current tax assets 4, 5 866,917 - 357,517 - Inventories, net 4, 5, 6(7) 26,539,614 7 33,922,914 9 Prepayments 6(8) 1,390,432 - 1,505,221 - Non-current assets held for sale 4, 6(30) - - 3,633,726 1 Other current assets 1,600,624 1 1,413,935 - Total current assets 238,664,496 60 220,277,570 59

Non-current assets Financial assets at fair value through profit or loss-noncurrent 4, 5, 6(2) 4,616,406 1 4,997,093 2 Available-for-sale financial assets-noncurrent 4, 5, 6(3) 14,345,644 4 18,914,717 5 Financial assets measured at cost-noncurrent 4, 6(4) 12,635,302 3 6,895,187 2 Debt instrument investments for which no active market exists-noncurrent 4, 6(5), 8 397,880 - 257,928 - Investments accounted for using the equity method 4, 6(9), 6(29) 5,777,104 2 5,905,795 2 Property, plant and equipment 4, 6(10), 6(30), 8 36,938,640 10 36,857,740 10 Investment property 4, 6(11), 8 873,651 - 651,408 - Intangible assets 4, 6(12), 6(13), 6(30) 76,029,080 19 72,014,554 19 Deferred tax assets 4, 5, 6(27) 3,898,877 1 3,265,695 1 Refundable deposits 319,734 - 326,152 - Long-term lease receivables 4, 6(14) - - 211,137 - Prepayments for investments 160,340 - - - Net defined benefit assets-noncurrent 4, 6(18) 2,080 - 2,070 - Long-term prepaid rent 154,951 - 134,726 - Total non-current assets 156,149,689 40 150,434,202 41

Total assets $ 394,814,185 100 $ 370,711,772 100

The accompanying notes are an integral part of the consolidated financial statements.

Chairman : Ming-Kai Tsai President : Lih-Shyng Tsai Chief Financial Officer : David Ku

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LIABILITIES AND EQUITY Notes December 31, 2017 % December 31, 2016 % Current liabilities Short-term borrowings 6(15) $ 64,315,682 16 $ 54,523,984 15 Financial liabilities at fair value through profit or loss-current 4, 5, 6(2) 18,144 - 45,098 - Trade payables 23,012,859 6 23,706,560 6 Trade payables to related parties 7 571,593 - 923,557 - Other payables 6(16) 35,796,290 9 33,937,995 9 Current tax liabilities 4, 5, 6(27) 1,980,597 1 3,415,214 1 Liabilities directly associated with non-current assets held for sale 4, 6(30), 7 - - 675,043 - Other current liabilities 1,525,368 - 2,100,815 1 Current portion of long-term liabilities 6(17), 8 36,850 - 18,425 - Total current liabilities 127,257,383 32 119,346,691 32

Non-current liabilities Long-term borrowings 6(17), 8 336,192 - 400,661 - Long-term payables 1,726,364 1 - - Net defined benefit liabilities-noncurrent 4, 6(18) 657,072 - 840,331 - Deposits received 7 179,472 - 177,512 - Deferred tax liabilities 4, 5, 6(27) 3,126,723 1 3,025,449 1 Non-current liabilities-others 331,966 - 258,250 - Total non-current liabilities 6,357,789 2 4,702,203 1 Total liabilities 133,615,172 34 124,048,894 33

Equity attributable to owners of the parent Share capital 6(19) Common stock 15 ,814,140 4 15 ,821,122 4 Capital collected in advance 231 - - - Capital surplus 6(19), 6(20), 6(31) 88 ,210,819 22 89 ,815,356 24 Retained earnings 6(19) Legal reserve 36 ,998,379 9 34 ,628,319 10 Undistributed earnings 100 ,629,197 26 92 ,324,282 25 Other equity 6(20) 18 ,214,847 5 12 ,245,801 3 Treasury shares 4, 6(19) ( 55,970) - ( 55,970) - Equity attributable to owners of the parent 259 ,811,643 66 244 ,778,910 66 Non-controlling interests 4, 6(19), 6(31) 1 ,387,370 - 1 ,883,968 1 Total equity 261 ,199,013 66 246 ,662,878 67

Total liabilities and equity $ 394,814,185 100 $ 370,711,772 100

The accompanying notes are an integral part of the consolidated financial statements.

Chairman : Ming-Kai Tsai President : Lih-Shyng Tsai Chief Financial Officer : David Ku

- 9 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2017 and 2016 (Amounts in thousands of New Taiwan Dollars, except for earnings per share)

Description Notes 2017 % 2016 % Net sales 4, 5, 6(21) $ 238,216,318 100 $ 275,511,714 100 Operating costs 4, 5, 6(7), 6(22), 7 (153,330,436) ( 64) (177,321,882) ( 64) Gross profit 84 ,885,882 36 98 ,189,832 36

Operating expenses 6(22), 7 Selling expenses (10,465,092) (5) (12,413,733) (5) Administrative expenses (7,430,872) (3) (7,015,080) (3) Research and development expenses (57,170,776) (24) (55,685,244) (20) Total operating expenses (75,066,740) (32) (75,114,057) (28)

Operating income 9 ,819,142 4 23 ,075,775 8

Non-operating income and expenses Other income 4, 6(23), 7 3,475,974 1 3,485,549 2 Other gains and losses 4, 6(24) 14,809,523 6 544,326 - Finance costs 6(25) ( 939,344) - ( 558,906) - Share of profit of associates accounted for using the equity method 4, 6(9) 72,168 - 666,141 - Total non-operating income and expenses 17,418,321 7 4,137,110 2

Net income before income tax 27,237,463 11 27,212,885 10 Income tax expense 4, 5, 6(27) (3,167,365) (1) (3,182,353) (1) Net income 24,070,098 10 24,030,532 9

Other comprehensive income 4, 6(9), 6(26), 6(27) Items that may not be reclassified subsequently to profit or loss Remeasurements of the defined benefit plan 207,977 - ( 65,079) - Income tax relating to those items not to be reclassified to profit or loss ( 35,356) - 11,064 - Items that may be reclassified subsequently to profit or loss Exchange differences resulting from translating the financial statements of foreign operations (4,439,045) (2) (4,504,523) (2) Unrealized gains from available-for-sale financial assets 10,785,999 5 11,297,597 4 Share of other comprehensive income of associates accounted for using the equity method ( 7,559) - 125,345 - Income tax relating to those items to be reclassified to profit or loss (1,248,983) (1) (1,172,986) -

Other comprehensive income, net of tax 5,263,033 2 5,691,418 2

Total comprehensive income $ 29,333,131 12 $ 29,721,950 11

Net income (loss) for the periods attributable to : Owners of the parent 6(28) $ 24,332,604 $ 23,700,598 Non-controlling interests 6(19), 6(31) ( 262,506) 329,934 $ 24,070,098 $ 24,030,532

Total comprehensive income for the periods attributable to : Owners of the parent $ 29,601,582 $ 29,463,494 Non-controlling interests ( 268,451) 258,456 $ 29,333,131 $ 29,721,950

Basic Earnings Per Share (in New Taiwan Dollars) 6(28) $ 15.56 $ 15.16

Diluted Earnings Per Share (in New Taiwan Dollars) 6(28) $ 15.47 $ 15.13

The accompanying notes are an integral part of the consolidated financial statements.

Chairman : Ming-Kai Tsai President : Lih-Shyng Tsai Chief Financial Officer : David Ku

- 10 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the years ended December 31, 2017 and 2016 (Amounts in thousands of New Taiwan Dollars)

Equity attributable to owners of the parent Share capital Retained earnings Other equity

Exchange differences Unrealized Equity attributable Non-controlling Description Capital resulting from Treasury Total equity Common Capital collected Legal Undistributed gains (losses) to owners of interests surplus translating Other shares stock in advance reserve earnings from available-for-sale the parent the financial statements financial assets of foreign operations

Balance as of January 1, 2016 $ 15,715,837 $ - $ 88,354,178 $ 32,032,476 $ 96,476,287 $ 6,503,595 $ 1,401,323 $ - $ (55 ,970) $ 240,427,726 $ 6,659,159 $ 247,086,885 Appropriation and distribution of 2015 earnings: Legal reserve - - - 2,595,843 (2,595,843) ------Cash dividends - - - - (17,287,421) - - - - (17,287,421) - (17,287,421) Total - - - 2,595,843 (19,883,264) - - - - (17,287,421) - (17,287,421)

Profit for the year ended December 31, 2016 - - - - 23,700,598 - - - - 23,700,598 329,934 24,030,532

Other comprehensive income for the year ended December 31, 2016 - - - - (54 ,015) (4,307,700) 10,124,611 - - 5,762,896 (71 ,478) 5,691,418 Total comprehensive income - - - - 23,646,583 (4,307,700) 10,124,611 - - 29,463,494 258,456 29,721,950

Share-based payment transactions - - 10,353 ------10,353 - 10,353 Adjustments due to dividends that subsidiaries received from parent company - - 85,735 ------85,735 - 85,735 The differences between the fair value of the consideration paid or received from acquiring or disposing subsidiaries and the carrying amounts of the subsidiaries - - (142 ,643) - (7,915,324) - - - - (8,057,967) - (8,057,967) Changes in ownership interests in subsidiaries - - (99 ,948) ------(99 ,948) 220,048 120,100 Issuance of restricted stock for employees 105,285 - 1,660,064 - - - - (1,476,028) - 289,321 - 289,321 Changes in associates and joint ventures accounted for using the equity method - - (52 ,383) ------(52 ,383) - (52 ,383) Non-controlling interests ------(5,253,695) (5,253,695) Balance as of December 31, 2016 15,821,122 - 89,815,356 34,628,319 92,324,282 2,195,895 11,525,934 (1,476,028) (55 ,970) 244,778,910 1,883,968 246,662,878 Appropriation and distribution of 2016 earnings: Legal reserve - - - 2,370,060 (2,370,060) ------Cash dividends - - - - (12,652,827) - - - - (12,652,827) - (12,652,827) Total - - - 2,370,060 (15,022,887) - - - - (12,652,827) - (12,652,827)

Cash dividends distributed from capital surplus - - (2 ,372,405) ------(2 ,372,405) - (2 ,372,405)

Profit for the year ended December 31, 2017 - - - - 24,332,604 - - - - 24,332,604 (262 ,506) 24,070,098 Other comprehensive income for the year ended December 31, 2017 - - - - 172,621 (4,440,659) 9,537,016 - - 5,268,978 (5,945) 5,263,033

Total comprehensive income - - - - 24,505,225 (4,440,659) 9,537,016 - - 29,601,582 (268 ,451) 29,333,131

Share-based payment transactions - 231 (14 ,935) ------(14 ,704) 15,072 368 Adjustments due to dividends that subsidiaries received from parent company - - 74,044 ------74,044 - 74,044 The differences between the fair value of the consideration paid or received from acquiring or disposing subsidiaries and the carrying amounts of the subsidiaries - - - - (1,210,299) (5 ,524) - - - (1,215,823) - (1,215,823) Changes in ownership interests in subsidiaries - - 969,913 ------969,913 1,028,273 1,998,186 Issuance of restricted stock for employees (6,982) - (259 ,863) - 32,876 - - 878,213 - 644,244 - 644,244 Changes in other capital surplus - - (1,291) ------(1,291) 10,619 9,328 Non-controlling interests ------(1,282,111) (1,282,111) Balance as of December 31, 2017 $ 15,814,140 $ 231 $ 88,210,819 $ 36,998,379 $ 100,629,197 $ (2,250,288) $ 21,062,950 $ (597,815) $ (55 ,970) $ 259,811,643 $ 1,387,370 $ 261,199,013

The accompanying notes are an integral part of the consolidated financial statements.

Chairman : Ming-Kai Tsai President : Lih-Shyng Tsai Chief Financial Officer : David Ku

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Description 2017 2016 Cash flows from operating activities : Profit before tax from continuing operations $ 27 ,237,463 $ 27 ,212,885 Adjustments for: The profit or loss items which did not affect cash flows: Depreciation 3,558,022 3,061,378 Amortization 3,652,327 3,834,700 Bad debt provision (reversal) 52,612 (125,735) (Gains) losses on financial assets and liabilities at fair value through profit or loss (96,850) 150,092 Interest expenses 939,344 558,906 Interest income (2,553,755) (2,517,861) Dividend income (580,035) (398,259) Share-based payment expenses 618,533 306,762 Share of profit of associates accounted for using the equity method (72,168) (666,141) Losses on disposal of property, plant and equipment 30,714 15,778 Property, plant and equipment transferred to expenses 2,685 - Losses on disposal of intangible assets 450 909 Gains on disposal of non-current assets held for sale (5,123,575) - (Gains) losses on disposal of investments (8,843,983) 114,121 Gains on disposal of investments accounted for using the equity method (1,496,172) (308,804) Impairment of financial assets 416,414 71,172 Others 193,093 - Changes in operating assets and liabilities: Financial assets at fair value through profit or loss 1,293,511 2,505,819 Notes receivables - (2,811) Trade receivables 3,549,518 (3,085,118) Other receivables (427,367) (2,175,536) Inventories 8,626,099 (8,168,244) Prepayments 151,070 716,052 Other current assets (180,889) 731,009 Other non-current assets-others - 78,429 Trade payables (7,292,580) 8,004,952 Trade payables to related parties (351,964) 288,747 Other payables 739,330 2,490,761 Other current liabilities (502,469) 65,439 Long-term payables - (56,212) Net defined benefit liabilities 9,460 13,270 Non-current liabilities-others 73,716 101,315 Cash generated from operating activities: Interest received 2,543,031 1,928,317 Dividend received 671,397 591,786 Interest paid (887,340) (561,624) Income tax paid (4,601,206) (2,228,537) Net cash provided by operating activities 21 ,348,436 32 ,547,717 Cash flows from investing activities : Acquisition of available-for-sale financial assets (5,988,436) (7,600,096) Proceeds from disposal of available-for-sale financial assets 6,458,873 7,860,169 Acquisition of debt instrument investments for which no active market exists (1,612,505) (2,581,738) Proceeds from disposal of debt instrument investments for which no active market exists 1,916,353 787,445 Proceeds from redemption of held-to-maturity financial assets - 1,491,256 Acquisition of financial assets measured at cost (7,557,416) (2,215,603) Proceeds from disposal of financial assets measured at cost 202,762 129 Proceeds from capital return of financial assets measured at cost 29,373 38,268 Acquisition of investments accounted for using the equity method (925,288) (4,612,267) Proceeds from disposal of investments accounted for using the equity method 559 - Increase in prepayments for investments (160,340) - Net cash outflow from acquisition of subsidiaries (1,056,531) (2,406,378) Proceeds from disposal of non-current assets held for sale 5,683,619 - Acquisition of property, plant and equipment (4,053,439) (6,671,275) Proceeds from disposal of property, plant and equipment 8,151 67,752 Decrease (increase) in refundable deposits 12,474 (66,503) Acquisition of intangible assets (1,795,842) (366,912) Proceeds from disposal of intangible assets 137 - Acquisition of investment property (1,436) (732) Decrease (increase) in long-term lease receivables 211,898 (209,684) (Increase) decrease in long-term prepaid rent (20,225) 16,138 Net cash used in investing activities (8,647,259) (16,470,031) Cash flows from financing activities : Increase in short-term borrowings 11 ,597,859 5,455,795 Proceeds from long-term borrowings - 124,286 Repayment of long-term borrowings (46,044) - Increase in deposits received 1,960 7,774 Proceeds from exercise of employee stock options 6,444 - Cash dividends (14,912,148) (17,201,686) Disposal of ownership interests in subsidiaries(without losing control) 80,843 - Acquisition of subsidiaries (2,108,605) (14,184,102) Change in non-controlling interests 1,595,838 987,964 Net cash used in financing activities (3,783,853) (24,809,969) Effect of changes in exchange rate on cash and cash equivalents (4,139,806) (3,198,288) Net increase (decrease) in cash and cash equivalents 4,777,518 (11,930,571) Cash and cash equivalents at the beginning of the year 140 ,560,858 153 ,279,687 Cash and cash equivalents at the end of the year $ 145,338,376 $ 141,349,116

Reconciliation of the balances of cash and cash equivalents at the end of the year: Cash and cash equivalents on the consolidated balance sheets $ 145,338,376 $ 140,560,858 Cash and cash equivalents included in non-current assets held for sale - 788,258 Cash and cash equivalents at the end of the year $ 145,338,376 $ 141,349,116

The accompanying notes are an integral part of the consolidated financial statements.

Chairman : Ming-Kai Tsai President : Lih-Shyng Tsai Chief Financial Officer : David Ku

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1. Organization and Operation As officially approved, MediaTek Inc. (“MTK”) was incorporated at Hsinchu Science-based Industrial Park on May 28, 1997. Since then, it has been specialized in the R&D, production, manufacturing and marketing of multimedia integrated circuits (ICs), computer peripherals oriented ICs, high-end consumer-oriented ICs and other ICs of extraordinary application. Meanwhile, it has rendered design, test runs, maintenance and repair and technological consultation services for software & hardware of the aforementioned products, import and export trades for the aforementioned products, sale and delegation of patents and circuit layout rights for the aforementioned products.

2. Date and Procedures of Authorization of Financial Statements for Issue The consolidated financial statements were authorized for issue in accordance with a resolution of the Board of Directors on March 23, 2018.

3. Newly Issued or Revised Standards and Interpretations (1) Adoption of the newly issued or revised standards and interpretations

MTK and its subsidiaries (“the Company”) applied for International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations developed by the International Financial Reporting Interpretation Committee (IFRIC) and Interpretations of IASs (SIC) (collectively, “TIFRS”) issued, revised or amended which are recognized by Financial Supervisory Commission (“FSC”) and become effective for annual periods beginning on or after January 1, 2017. The application has no material effect on the Company.

(2) Standards or interpretations issued, revised or amended, which are recognized by FSC, but not yet adopted by the Company as at the end of the reporting period are listed below:

Standards or Effective Interpretations Numbers The Projects of Standards or Interpretations Dates IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 IFRS 9 “Financial Instruments” January 1, 2018

(To be continued)

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(Continued) Standards or Effective Interpretations Numbers The Projects of Standards or Interpretations Dates IFRS 10 and IAS 28 “Consolidated Financial Statements” and Postponed “Investments in Associates and Joint indefinitely Ventures” (Amendment) - Sale or Contribution of Assets between an Investor and its Associates or Joint Ventures IAS 12 “Income Taxes”- Recognition of Deferred Tax January 1, 2017 Assets for Unrealised Losses IAS 7 “Statement of Cash Flows” (Amendment) - January 1, 2017 Disclosure Initiative IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 (Clarification) IFRS 2 “Shared-Based Payment” (Amendment) January 1, 2018 IFRS 4 “Insurance Contracts” (Amendment) Not earlier than 2020 IAS 40 “Investment Property” (Amendment) January 1, 2018 Improvements to International Financial Reporting Standards (2014-2016 cycle) : IFRS 1 “First-time Adoption of International Financial January 1, 2018 Reporting Standards” IFRS 12 “Disclosure of Interests in Other Entities” January 1, 2017 IAS 28 “Investments in Associates and Joint Ventures” January 1, 2018 IFRIC 22 “Foreign Currency Transactions and Advance January 1, 2018 Consideration”

A. IFRS 15 “Revenue from Contracts with Customers” The core principle of the new Standard is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognizes revenue in accordance with that core principle by applying the following steps:

Step 1：Identify the contracts with a customer; Step 2：Identify the performance obligations in the contract; Step 3：Determine the transaction price;

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Step 4：Allocate the transaction price to the performance obligations in the contracts; Step 5：Recognize revenue when the entity satisfies a performance obligation.

IFRS 15 also includes a cohesive set of disclosure requirements that would result in an entity providing users of financial statements with comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts with customers.

B. IFRS 9 “Financial Instruments” International Accounting Standards Board (“IASB”) has issued the final version of IFRS 9, which combines classification and measurement, impairment and hedge accounting. The standard will replace IAS 39 “Financial Instruments: Recognition and Measurement” and all previous versions of IFRS 9 “Financial Instruments” (which include standards issued on classification and measurement of financial assets and liabilities and hedge accounting).

Classification and measurement: Financial assets are measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income, based on both the entity’s business model for managing the financial assets and the financial asset’s contractual cash flow characteristics. Financial liabilities are measured at amortized cost or fair value through profit or loss. Furthermore, there is a requirement that ‘own credit risk’ adjustments are not recognized in profit or loss.

Impairment: Expected credit loss model is used to evaluate impairment. Entities are required to recognize either 12-month or lifetime expected credit losses, depending on whether there has been a significant increase in credit risk since initial recognition.

Hedge accounting: Hedge accounting is more closely aligned with risk management activities and hedge effectiveness is measured based on the hedge ratio.

Consequential amendments on the related disclosures are also applicable with the new standards.

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C. IFRS 15 “Revenue from Contracts with Customers” (Clarification) The amendments clarify how to identify a performance obligation in a contract, determine whether an entity is a principal or an agent, and determine whether the revenue from granting a license should be recognized at a point in time or over time.

D. Improvements to International Financial Reporting Standards (2014-2016 cycle):

IAS 28 “Investments in Associates and Joint Ventures” The amendments clarify that when an investment in an associate or a joint venture is held by, or is held indirectly through, an entity that is a venture capital organization, or a mutual fund, unit trust and other qualifying entities including investment-linked insurance funds, the entity may elect to measure that investment at fair value through profit or loss in accordance with IFRS 9 “Financial Instruments” on an investment-by-investment basis. Besides, if an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, the entity may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate's or joint venture's interests in subsidiaries on an investment-by-investment basis.

The abovementioned standards and interpretations issued by IASB and recognized by FSC will become effective for annual periods beginning on or after January 1, 2018. Except for the potential impact of the standards and interpretations listed under A-D which is described below, the remaining standards and interpretations have no material impact on the Company.

A. IFRS 15 “Revenue from Contracts with Customers” (including Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue from Contracts with Customers”)

The Company elected to recognize the cumulative effect of initially applying IFRS 15 at the date of initial application (January 1, 2018). The Company also elected to apply this standard retrospectively only to contracts that are not completed contracts at the date of initial application.

The Company’s principal activities consist of the sale of goods and rendering of services. The impacts arising from the adoption of IFRS 15 on the Company are summarized as follows：

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(A) Revenue is currently recognized by reference to the stage of completion. Starting from the date of initial application, in accordance with IFRS 15, the Company shall recognize revenue when (or as) the Company satisfies a performance obligation by transferring a promised service to a customer and also by reference to the stage of completion. The aforementioned difference was expected to result in, at the date of initial application, decrease of retained earnings by NT$211,277 thousand and increase of contracts liabilities by NT$240,087 thousand, as well as increase of relevant deferred tax assets by NT$28,810 thousand. For some rendering of services contracts, part of the consideration was received from customers upon signing the contract, then the Company has the obligation to provide the services subsequently. The Company recognized the consideration received in advance from customers as payment received in advance under other current liabilities. Starting from the date of initial application, in accordance with IFRS 15, it should be recognized as contract liabilities. The amount reclassified from other current liabilities to contracts liabilities of the Company as at the date of initial application was NT$121,149 thousand.

(B) In accordance with the requirements of IFRS 15, more extensive disclosure would have to be made.

B. IFRS 9 “Financial Instruments”

The Company elects not to restate prior periods in accordance with the requirements of IFRS 9 at the date of initial application (January 1, 2018). The adoption of IFRS 9 has the following impacts on the Company:

(A) Classification and measurement of financial assets

Available-for-sale financial assets – equity instrument investments The assessment of the cash flow characteristics will be based on the facts and circumstances that existed as at the date of initial application.

As these equity instrument investments are not held-for-trading, the Company elected to designate them as financial assets measured at fair value through other comprehensive income. On the date of initial application, the Company will reclassify available-for-sale financial assets (including financial assets measured at cost of NT$12,334,155 thousand) to financial assets measured at fair value through other comprehensive income of NT$38,180,426 thousand. Other related adjustments are described as follow:

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(a) The equity instrument investments currently measured at cost in accordance with IAS 39 of NT$12,334,155 thousand had an original cost of NT$13,617,769 thousand, among which NT$1,283,614 thousand were impaired. However, in accordance with the requirement of IFRS 9, equity instrument investments must be measured at fair value but are not required to be assessed for impairment. The estimated fair value of the equity instrument investments were NT$14,219,155 thousand as at the date of initial application. The Company will reclassify financial assets measured at cost to financial assets measured at fair value through other comprehensive income of NT$12,334,155 thousand and will also adjust and increase the carrying amount to NT$14,219,155 thousand, as well as increasing retained earnings and other equity by NT$1,283,614 thousand and NT$601,386 thousand at the date of initial application, respectively.

(b) The equity instrument investments currently measured at cost in accordance with IAS 39 of NT$301,147 thousand, in accordance with the requirement of IFRS9, must be measured at fair value but are not required to be assessed for impairment. The estimated fair value of the equity instrument investments was NT$495,038 thousand as at the date of initial application. The Company will reclassify financial assets measured at cost to financial assets at fair value through profit or loss of NT$301,147 thousand and will also adjust and increase the carrying amount to NT$495,038 thousand, as well as increasing retained earnings by NT$193,891 thousand at the date of initial application.

(c) The equity instrument investments of NT$25,846,271 thousand are currently measured at fair value. As the date of initial application, except for the reclassification to financial assets measured at fair value through other comprehensive income and other equity accounts, no other difference will incur.

Available-for-sale financial assets – fund investments As the cash flow characteristics for funds are not solely payments of principal and interest on the principal amount outstanding, funds are classified as financial assets mandatorily measured at fair value through profit or loss in accordance with IFRS 9.

As at the date of initial application, the Company will reclassify available-for-sale financial assets of NT$5,732,583 thousand to financial assets mandatorily measured at fair value through profit or loss. Besides, changes in fair value of NT$265,366 thousand previously recognized in other equity will be reclassified to retained earnings.

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Available-for-sale financial assets – de-recognition of equity investments measured at fair value Upon de-recognition of equity investments currently classified as available-for-sale measured at fair value, the accumulated gains or losses previously recognized in other comprehensive income was recycled to profit or loss from equity. However under IFRS 9, subsequent fair value changes of the aforementioned equity investments are recognized in other comprehensive income and cannot be recycled to profit or loss. Upon de-recognition, the accumulated amounts in other component of equity is reclassified to retained earnings (reclassification to profit or loss is not allowed).

Impairment of financial assets This is applicable to financial assets not measured at fair value through profit or loss. In accordance with the requirements of IFRS 9, a loss allowance for debt instruments is measured using the expected credit loss model, whereas trade receivables or contract assets that result from transactions that are within the scope of IFRS 15 is measured using the simplified approach (provision matrix); The aforementioned requirements on impairment is different from the current incurred loss model and have no material impact on the Company.

Besides, under IFRS9, impairment assessment is not required for equity instruments. Therefore, as the Company elects to classify certain equity investments as financial assets measured at fair value through other comprehensive income, the Company will reclassify an accumulated impairment loss of NT$816,032 thousand from retained earnings to other component of equity.

(B) Investments accounted for using the equity method

The Company will adjust and increase both of the investments accounted for using the equity method and other equity of NT$7,231,728 thousand at the date of initial application as a result of the application of IFRS 9.

Consequential amendments on the related disclosures in IFRS 7 were also made as a result of the application of IFRS 9, which include the disclosure requirements related to the initial application of IFRS 9. Therefore more extensive disclosure would have to be made.

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C. IAS 28 “Investments in Associates and Joint Ventures”

The Company will make an election and disclose properly in financial statement on such investment at January 1, 2018.

(3) Standards or interpretations issued, revised or amended, by IASB but not yet recognized by FSC at the date of issuance of the Company’s financial statements are listed below:

Standards or Effective Interpretations Numbers The Projects of Standards or Interpretations Dates IFRS 16 “Leases” January 1, 2019 IFRIC 23 “Uncertainty Over Income Tax Treatments” January 1, 2019 IFRS 17 “Insurance Contracts” January 1, 2021 IAS 28 “Investments in Associates and Joint Ventures” January 1, 2019 (Amendment) IFRS 9 “Prepayment Features with Negative January 1, 2019 Compensation”(Amendment) Improvements to International Financial Reporting Standards (2015-2017 cycle) : IFRS 3 “Business Combinations” January 1, 2019 IFRS 11 “Joint Arrangements” January 1, 2019 IAS 12 “Income Taxes” January 1, 2019 IAS 23 “Borrowing Costs” January 1, 2019 IAS 19 “Employee Benefits”- Plan Amendment, January 1, 2019 Curtailment or Settlement

A. IFRS 16 “Leases” The new standard requires lessees to account for all leases under a single on-balance sheet model (subject to certain exemptions). Lessor accounting still uses the dual classification approach: operating lease and finance lease.

B. IFRIC 23 “Uncertainty Over Income Tax Treatments” The Interpretation clarifies application of recognition and measurement requirements in IAS 12 “Income Taxes” when there is uncertainty over income tax treatments.

C. IAS 28 “Investment in Associates and Joint Ventures” — Amendments to IAS 28 The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture before it applies IAS 28, and in applying IFRS 9, does not take account of any adjustments that arise from applying IAS 28.

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The abovementioned standards and interpretations issued by IASB have not yet been recognized by FSC at the date of issuance of the Company’s financial statements, the local effective dates are to be determined by FSC. As the Company is currently determining the potential impact of the standards and interpretations listed under A-C, it is not practicable to estimate their impact on the Company at this point in time. All other standards and interpretations have no material impact on the Company.

4. Summary of Significant Accounting Policies Statement of Compliance The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”) and TIFRS as endorsed by FSC.

Basis of Preparation The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The consolidated financial statements are expressed in thousands of New Taiwan Dollars (“NT$”) unless otherwise stated.

Basis of Consolidation Preparation principle of consolidated financial statement Control is achieved when MTK is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, MTK controls an investee if and only if MTK has:

a. power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); b. exposure, or rights, to variable returns from its involvement with the investee; and c. the ability to use its power over the investee to affect its returns.

When MTK has less than a majority of the voting or similar rights of an investee, MTK considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

a. the contractual arrangement with the other vote holders of the investee; b. rights arising from other contractual arrangements; c. MTK’s voting rights and potential voting rights.

MTK re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

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Subsidiaries are fully consolidated from the acquisition date, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using uniform accounting policies. All intra-group balances, income and expenses, unrealized gains and losses and dividends resulting from intra-group transactions are eliminated in full.

A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.

Total comprehensive income of the subsidiaries is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

If loses control of a subsidiary, it: a. derecognizes the assets (including goodwill) and liabilities of the subsidiary; b. derecognizes the carrying amount of any non-controlling interest; c. recognizes the fair value of the consideration received; d. recognizes the fair value of any investment retained; e. recognizes any surplus or deficit in profit or loss; and f. reclassifies the parent’s share of components previously recognized in other comprehensive income to profit or loss.

The consolidated entities are listed as follows: Percentage of Ownership December 31, December 31,

Investor Subsidiary Business nature 2017 2016 Note MTK Hsu-Ta Investment General investing 100% 100% - Corp. MTK MediaTek Singapore Research, 100% 100% - Pte. Ltd. manufacturing and sales MTK MediaTek Investment General investing 100% 100% - Singapore Pte. Ltd. MTK Airoha (Cayman) Inc. General investing - 100% 1 MTK MStar Semiconductor Research, 100% 100% - Inc. manufacturing and sales (To be continued)

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(Continued) Percentage of Ownership December 31, December 31, Investor Subsidiary Business nature 2017 2016 Note MTK Hsu-Chuang General investing 100% 100% - Investment Corp. MTK HFI Intellectual property 100% 100% 2 Innovation Inc. right management MTK Airoha Technology Research, 7% - 3 Corp. manufacturing and sales Hsu-Ta Investment Core Tech Resources General investing 100% 100% -

Corp. Inc. Hsu-Ta Investment MediaTek Capital General investing 100% 100% -

Corp. Corp. Hsu-Ta Investment MediaTek Bangalore Research 0% 0% -

Corp. Private Limited Hsu-Ta Investment Hsu-Si General investing 100% 100% -

Corp. Investment Corp. Hsu-Ta Investment Airoha Technology Research, - - 3 Corp. Corp. manufacturing and sales MediaTek Capital RollTech Technology Software development 67% 67% - Corp. Co., Ltd. MediaTek Capital E-Vehicle Research, 47% 51% - Corp. Semiconductor manufacturing and Technology Co., sales Ltd. MediaTek Capital Chingis Research 100% 100% - Corp. Technology Corp. MediaTek Capital Velocenet Inc. Research 100% 100% - Corp. MediaTek Capital Nephos (Taiwan) Inc. Research 100% 100% - Corp. MediaTek Capital Airoha Technology Research, - - 3 Corp. Corp. manufacturing and sales

(To be continued)

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(Continued) Percentage of Ownership December 31, December 31, Investor Subsidiary Business nature 2017 2016 Note Core Tech Resources MediaTek India Research 0% 0% - Inc. Technology Pvt. Ltd. Hsu-Si Richtek Research, 100% 100% 4 Investment Corp. Technology Corp. manufacturing and sales Hsu-Si Airoha Technology Research, 93% - 3 Investment Corp. Corp. manufacturing and sales Hsu-Si Airoha (Cayman) Inc. General investing 100% - 1 Investment Corp. Richtek Richstar Group Co., General investing 100% 100% 4 Technology Corp. Ltd. Richtek Ironman Overseas Co., General investing 100% 100% 4 Technology Corp. Ltd. Richtek Richtek Europe General investing 100% 100% 4 Technology Corp. Holding B.V. Richtek Richtek Holding General investing 100% 100% 4 Technology Corp. International Limited Richtek Richpower Manufacturing and 100% 100% 4 Technology Corp. Microelectronics sales Corp. Richtek Li-Yu General investing 100% 100% 4 Technology Corp. Investment Corp. Richtek Richnex Research, 79% 77% 4 Technology Corp. Microelectronics manufacturing and Corp. sales Richtek Richtek Global General investing 100% 100% 4 Technology Corp. Marketing Co., Ltd. Richstar Group Co., Ltd. Richtek USA Inc. Sales and marketing 100% 100% 4 service Ironman Overseas Co., Cosmic-Ray General investing 100% 100% 4 Ltd. Technology Limited Richtek Europe Holding Richtek Europe B.V. Marketing service 100% 100% 4 B.V. (To be continued)

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(Continued) Percentage of Ownership December 31, December 31, Investor Subsidiary Business nature 2017 2016 Note Cosmic-Ray Technology Li-We Technology Marketing service 100% 100% 4 Limited Corp. Richpower Richpower Management service 100% 100% 4 Microelectronics Microelectronics Corp. Corporation Richpower Richpower Marketing service 100% 100% 4 Microelectronics Microelectronics Corp. Co., Ltd. Li-Yu Corporate Event Marketing service 51% 51% 4 Investment Corp. Limited Richtek Global Richtek Korea LLC. Sales and marketing 100% 100% 4 Marketing Co., Ltd service Airoha (Cayman) Inc. Airotek (Shenzhen) Research 100% - 5 Inc. Airoha (Cayman) Inc. Airotek (Chengdu) Research 100% - 5 Inc. Airoha Technology Airoha Technology General investing 100% - 3 Corp. (Samoa) Corp. Gaintech Co. Limited MediaTek China General investing 100% 100% - Limited Gaintech Co. Limited MTK Wireless Research 100% 100% - Limited (UK) Gaintech Co. Limited MediaTek Japan Inc. Research 100% 100% - Gaintech Co. Limited MediaTek India Research 100% 100% - Technology Pvt. Ltd. Gaintech Co. Limited MediaTek Korea Inc. Research 100% 100% - Gaintech Co. Limited Hesine Technologies General investing - 52% 6 International Worldwide Inc. Gaintech Co. Limited Gold Rich General investing 100% 100% - International (Samoa) Limited Gaintech Co. Limited Smarthead Limited General investing 100% 100% - Gaintech Co. Limited Ralink Technology General investing 100% 100% - (Samoa) Corp. (To be continued)

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(Continued) Percentage of Ownership December 31, December 31, Investor Subsidiary Business nature 2017 2016 Note Gaintech Co. Limited EcoNet (Cayman) Inc. General investing 77% 83% - Gaintech Co. Limited MediaTek Wireless Technology services 100% 100% - FZ-LLC Gaintech Co. Limited Digital Lord Limited General investing 100% 100% - Gaintech Co. Limited Hsu Chia (Samoa) General investing 100% 100% - Investment Ltd. Gaintech Co. Limited Hsu Fa (Samoa) General investing 100% 100% - Investment Ltd. Gaintech Co. Limited Hsu Kang (Samoa) General investing 100% 100% - Investment Ltd. Gaintech Co. Limited Nephos Pte. Ltd. Research 100% 100% - Gaintech Co. Limited Nephos Inc. Research 100% 100% - Gaintech Co. Limited Nephos Cayman General investing 100% 100% - Co. Limited Gaintech Co. Limited Dynamic Presence General investing 100% 100% 7 Limited Gaintech Co. Limited White Dwarf Limited General investing 100% 100% 8 Gaintech Co. Limited Zelus Technology Software development 100% - 9 (HangZhou) Ltd. and sales MediaTek China MediaTek (Hefei) Research 100% 100% - Limited Inc. MediaTek China MediaTek (Beijing) Research 100% 100% - Limited Inc. MediaTek China MediaTek (Shenzhen) Research and 100% 100% - Limited Inc. technology services MediaTek China MediaTek (Chengdu) Research 100% 100% - Limited Inc. MediaTek China MediaTek (Wuhan) Research 100% 100% - Limited Inc. MediaTek China Xuxin Investment General investing 100% 100% 10 Limited (Shanghai) Inc. MediaTek China MediaTek (Shanghai) Research 100% 100% - Limited Inc. MTK Wireless Limited MediaTek Sweden AB Research 100% 100% - (UK)

(To be continued)

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(Continued) Percentage of Ownership December 31, December 31, Investor Subsidiary Business nature 2017 2016 Note MTK Wireless Limited MediaTek USA Inc. Research 100% 100% - (UK) MTK Wireless Limited MediaTek Denmark Research - 100% 11 (UK) Aps MTK Wireless Limited MediaTek Wireless Research 100% 100% - (UK) Finland Oy Hesine Technologies Hesine Technologies, Technology services - 100% 12 International Inc. Worldwide Inc. Gold Rich Gold Rich General investing 100% 100% - International (Samoa) International (HK) Limited Limited Digital Lord Limited Lepower (HK) Limited General investing 100% 100% - Lepower (HK) Limited Lepower Technologies Research, 100% 91% - (Beijing), Inc. manufacturing and sales E-Vehicle E-Vehicle Holdings General investing 100% 100% - Semiconductor Corp. Technology Co., Ltd. E-Vehicle Holdings E-Vehicle Investment General investing 100% 100% - Corp. Limited

E-Vehicle Investment E-Vehicle Research, 100% 100% - Limited Semiconductor manufacturing and (Shanghai) Co., Ltd. sales EcoNet (Cayman) Inc. Shadow Investment General investing 100% 100% - Limited EcoNet (Cayman) Inc. EcoNet (HK) Limited Research and sales 100% 100% - EcoNet (Cayman) Inc. EcoNet Limited General investing - 100% 13 EcoNet (HK) Limited EcoNet (Suzhou) Research, 100% 100% - Limited manufacturing and sales EcoNet (Suzhou) EcoNet Limited General investing 100% - 13 Limited Shadow Investment MediaTek (Suzhou) Research - 100% 14 Limited Inc.

(To be continued)

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(Continued) Percentage of Ownership December 31, December 31, Investor Subsidiary Business nature 2017 2016 Note Shadow Investment MediaTek (Nanjing) Research 100% 100% - Limited Inc. Ralink Technology AutoChips Inc. Research, - 83% 15 (Samoa) Corp. manufacturing and sales MediaTek Investment MStar Semiconductor General investing - 100% 16 Singapore Pte. Ltd. B.V. MediaTek Investment Lightup International General investing - 100% 17 Singapore Pte. Ltd. Corp. MediaTek Investment MediaTek Bangalore Research 100% 100% - Singapore Pte. Ltd. Private Limited MediaTek Investment Gaintech Co. Limited General investing 100% 100% - Singapore Pte. Ltd. MediaTek Investment Cloud Ranger Limited General investing 100% 100% - Singapore Pte. Ltd. MStar Semiconductor, MStar France SAS Software development 100% 100% - Inc. MStar Semiconductor, Shunfonger General investing 100% 100% - Inc. Investment Holding Limited MStar Semiconductor, IStar Technology Ltd. General investing and 100% 100% - Inc. sales

MStar Semiconductor, MStar Co., Ltd. General investing 100% 100% - Inc.

MStar Semiconductor, Digimoc Holdings General investing 100% 100% - Inc. Limited

MStar Semiconductor, MStar Semiconductor Software and 100% 100% - Inc. UK Ltd. customer development MStar Semiconductor, ILI Technology Research, 100% 100% 18 Inc. Corporation manufacturing and sales MStar Semiconductor, AIT Holding Ltd. General investing - 100% 19 Inc.

(To be continued)

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(Continued) Percentage of Ownership December 31, December 31, Investor Subsidiary Business nature 2017 2016 Note MStar Semiconductor, MStar Technology Pte. Customer 100% 100% - Inc. Ltd. development MStar Semiconductor, MShining Selling of electronic 100% 100% 20 Inc. International parts Corporation MStar Semiconductor, Sigmastar Technology Research, 100% - 21 Inc. Corp. manufacturing and sales MStar Semiconductor, Sigmastar Technology General investing 100% - 22 Inc. Inc. AIT Holding Ltd. AIT Management Ltd. General investing - 100% 19 MStar Co. Ltd. MStar Software R&D Software and 100% 100% - (Shenzhen), Ltd. customer development Digimoc Holdings Bubbly Bay Holdings General investing 100% 100% - Limited Limited MStar Software R&D MStar Chen Xi Software and 100% 100% - (Shenzhen), Ltd. Software Shanghai customer Ltd. development MStar Semiconductor MSilicon Technology Research and 100% 100% 23 UK Ltd. Corp. technology services MStar Technology Pte. MStar Semiconductor Research and 100% 100% - Ltd. India Private technology services Limited IStar Technology Ltd. Beijing Ilitek Research and 100% 100% 24 Technology Co. Ltd. technology services ILI Technology ILITEK Holding Inc. General investing 100% 100% 18 Corporation ILITEK Holding Inc. ILI Technology (SZ) Technology services 100% 100% 18 LTD. MediaTek (Shenzhen) Shanghai General investing - 2% 25 Inc. ShanShengChuangXin Investment Partnership (Limited Partnership)

(To be continued)

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(Continued) Percentage of Ownership December 31, December 31, Investor Subsidiary Business nature 2017 2016 Note MediaTek (Shanghai) Shanghai General investing - 2% 25 Inc. ShanShengChuangXin Investment Partnership (Limited Partnership) Nephos Cayman Co. Nephos (Hefei) Co. Research, 63% 100% 26 Limited Ltd. manufacturing and sales

1. For the purpose of reorganization, the 100% ownership of T-Rich Technology (Cayman) Corp., which was previously owned by MTK, was transferred to Hsu-Si Investment Corp. in June 2017. After that, T-Rich Technology (Cayman) Corp. was renamed Airoha (Cayman) Inc. 2. MTK established HFI Innovation Inc. in February 2016. 3. Hsu-Si Investment Corp. (“Hsu-Si Investment”) accomplished the tender offer and acquired 40% shares of Airoha Technology Corp. (“Airoha”) in March 2017. A control over Airoha was obtained and therefore all the subsidiaries of Airoha were included in the consolidated entities thereafter. In July 2017, Hsu-Si Investment acquired the remaining 38% ownership of Airoha. Moreover, Hsu-Si acquire 5% and 17% shares of Airoha from Hsu-Ta Investment Corp. and MediaTek Capital Corp., respectively. Furthermore, MTK spun-off the business unit –Bluetooth related Internet of Things Product Line Business to Airoha, and acquired 7% new shares of the capital increase of Airoha in October 2017. 4. Hsu-Si Investment accomplished the take-over bid process to acquire 51% shares of Richtek Technology Corp. (“Richtek”) in October 2015. Hsu-Si Investment obtained control over Richtek. Subsidiaries of Richtek were included in the consolidated entities thereafter. In April 2016, Hsu-Si Investment acquired the remaining 49% ownership of Richtek. 5. Airoha (Cayman) Inc. established Airotek (Shenzhen) Inc. and Airotek (Chengdu) Inc. in September 2017. 6. For the purpose of reorganization, Hesine Technologies International Worldwide Inc. has been liquidated in November 2017. 7. Gaintech Co. Limited established Dynamic Presence Limited in April 2016. 8. For the purpose of reorganization, the 100% ownership of White Dwarf Limited, which was previously owned by MStar Semiconductor B.V., was transferred to Gaintech Co. Limited in April 2016. 9. Gaintech Co. Limited established Zelus Technology (HangZhou) Ltd. in October 2017. 10. MediaTek (Shanghai) Inc. was renamed Xuxin Investment (Shanghai) Inc. in March 2016. 11. For the purpose of reorganization, MediaTek Denmark Aps has been liquidated and returned the capital in May 2017. 12. For the purpose of reorganization, Hesine Technologies, Inc. has been liquidated in June 2017. 13. EcoNet (Cayman) Inc. established EcoNet Limited in October 2016. For the purpose of reorganization, the 100% ownership of EcoNet Limited, which was previously owned by EcoNet (Cayman) Inc., was transferred to EcoNet (Suzhou) Limited in December 2017.

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14. For the purpose of reorganization, MediaTek (Suzhou) Inc. has been liquidated and returned the capital in August 2017. 15. Ralink Technology (Samoa) Corp. transferred the shareholding rights of AutoChips Inc. and derecognized it in March 2017. 16. For the purpose of reorganization, MStar Semiconductor B.V. has been liquidated and returned the capital in June 2017. 17. For the purpose of reorganization, the 100% ownership of Light Up International Corp. (“Light Up International”), which was previously owned by MediaTek Investment Singapore Pte. Ltd. was transferred to Hsu-Ta Investment Corp. (“Hsu-Ta Investment”) in November 2017. Moreover, Light Up International was dissolved due to merger with Hsu-Ta Investment in December 2017. 18. Mrise Technology Inc. (“Mrise Tech.”) accomplished the acquisition of 100% shares of ILI Technology Corporation (“ILI Tech.”) in June 2016. After that, ILI Tech. was dissolved and Mrise Tech. was renamed ILI Technology Corporation (“ILI Tech.”). Subsidiaries of ILI Tech. were included in the consolidated entities thereafter. 19. For the purpose of reorganization, AIT Holding Ltd. and AIT Management Ltd. have been liquidated and returned the capital in July 2017. 20. MStar Semiconductor, Inc. established MShining International Corporation in March 2016. 21. MStar Semiconductor, Inc. established Sigmastar Technology Corp. in September 2017. 22. MStar Semiconductor, Inc. established Sigmastar Technology Inc. in October 2017. 23. MStar Semiconductor UK Ltd. established MSilicon Technology Corp. in March 2016. 24. IStar Technology Ltd. established MStar Chen Xin Technology (Beijing), Ltd. in May 2016. MStar Chen Xin Technology (Beijing), Ltd. was renamed Beijing Ilitek Technology Co. Ltd. in August 2016. 25. MediaTek (Shenzhen) Inc. and MediaTek (Shanghai) Inc. established Shanghai ShanShengChuangXin Investment Partnership (Limited Partnership) in February 2016. Since the Company has the ability to direct the relevant activities of Shanghai ShanShengChuangXin Investment Partnership (Limited Partnership) and has control over it, the Company included it in consolidation. Shanghai ShanShengChuangXin Investment Partnership (Limited Partnership) has been removed from the consolidated entities as the Company lost control over it as of September 2017. 26. Nephos Cayman Co. Limited established Nephos (Hefei) Co. Ltd. in July 2016.

Foreign currency transactions The Company’s consolidated financial statements are presented in NT$, which is also the parent company’s functional currency. Each entity in the Company determines its functional currency upon its primary economic environment and items included in the financial statements of each entity are measured using that functional currency.

- 31 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Transactions in foreign currencies are initially recorded by the Company’s entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non- monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

A. Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.

B. Foreign currency items within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are accounted for based on the accounting policy for financial instruments.

C. Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

- 32 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Translation of financial statements in foreign currency The assets and liabilities of foreign operations are translated into New Taiwan Dollars at the closing rate of exchange prevailing at the reporting date and their income and expenses are translated at an average rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized. On the partial disposal of foreign operations that result in a loss of control, loss of significant influence or joint control but retain partial equity is considering as disposal.

On the partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is re-attributed to the non-controlling interests in that foreign operation. In partial disposal of an associate or jointly controlled entity that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

Current and non-current distinction An asset is classified as current when: A. The Company expects to realize the asset, or intends to sell or consume it, in its normal operating cycle B. The Company holds the asset primarily for the purpose of trading C. The Company expects to realize the asset within twelve months after the reporting period D. The asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

- 33 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

A liability is classified as current when: A. The Company expects to settle the liability in its normal operating cycle B. The Company holds the liability primarily for the purpose of trading C. The liability is due to be settled within twelve months after the reporting period D. The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities are classified as non-current.

Cash and cash equivalents Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highly liquid time deposits or investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Financial instruments Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities within the scope of IAS 39“Financial Instruments: Recognition and Measurement” are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

A. Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

Financial assets of the Company are classified as financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans and receivables. The Company determines the classification of its financial assets at initial recognition.

a. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets at fair value through profit or loss are measured at fair value with changes in fair value recognized in profit or loss. Dividends or interests on financial assets at fair value through profit or loss are recognized in profit or loss (including those received during the period of initial investment).

- 34 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

A financial asset is classified as held for trading if: (a) it is acquired or incurred principally for the purpose of selling or repurchasing it in short term; (b) on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or (c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial asset at fair value through profit or loss; or a financial asset may be designated as at fair value through profit or loss when doing so results in more relevant information, because either: (a) it eliminates or significantly reduces a measurement or recognition inconsistency; or (b) a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

If financial assets do not have quoted prices in an active market and their fair value cannot be reliably measured, then they are classified as financial assets measured at cost on balance sheet and carried at cost net of accumulated impairment losses, if any, as at the reporting date.

b. Available-for-sale financial assets Available-for-sale investments are non-derivative financial assets that are designated as available-for-sale or those not classified as financial assets at fair value through profit or loss, held-to-maturity financial assets, or loans and receivables.

Foreign exchange gains and losses and interest calculated using the effective interest method relating to monetary available-for-sale financial assets, or dividends on an available-for-sale equity instrument, are recognized in profit or loss. Subsequent measurement of available- for-sale financial assets at fair value is recognized in equity until the investment is derecognized, at which time the cumulative gain or loss is recognized in profit or loss.

If equity instrument investments do not have quoted prices in an active market and their fair value cannot be reliably measured, then they are classified as financial assets measured at cost on balance sheet and carried at cost net of accumulated impairment losses, if any, as at the reporting date.

- 35 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

c. Held-to-maturity financial assets Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Company has the positive intention and ability to hold it to maturity, other than those that are designated as available-for-sale, classified as financial assets at fair value through profit or loss, or meet the definition of loans and receivables.

After initial measurement held-to-maturity financial assets are measured at amortized cost using the effective interest method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or transaction costs. The effective interest method amortization is recognized in profit or loss.

d. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that the Company upon initial recognition designates as available for sale, classified as at fair value through profit or loss, or those for which the holder may not recover substantially all of its initial investment.

Loans and receivables are separately presented on the balance sheet as receivables or debt instrument investment for which no active market exists. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or transaction costs. The effective interest method amortization is recognized in profit or loss.

e. Impairment of financial assets The Company assesses at each reporting date whether there is any objective evidence that an individual or a group of financial asset other than the financial assets at fair value through profit or loss is impaired. An individual or a group of financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more loss events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset. The carrying amount of the financial asset is reduced through the use of an allowance account and the amount of the loss is recognized in profit or loss.

A significant or prolonged decline in the fair value of an available-for-sale equity instrument below its cost is considered a loss event.

- 36 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Other loss events include: (a) significant financial difficulty of the issuer or obligor; or (b) a breach of contract, such as a default or delinquency in interest or principal payments; or (c) it becoming probable that the borrower will enter bankruptcy or other financial reorganization; or (d) the disappearance of an active market for that financial asset because of financial difficulties.

For held-to-maturity financial assets and loans and receivables measured at amortized cost, if there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate. Interest income is accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Receivables together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to profit or loss.

In the case of equity instruments classified as available-for-sale, where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss - is removed from other comprehensive income and recognized in profit or loss. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairment are recognized directly in other comprehensive income.

In the case of debt instruments classified as available-for-sale, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recognized in profit or loss. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through profit or loss.

- 37 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

f. Derecognition of financial assets A financial asset is derecognized when: (a) The rights to receive cash flows from the asset have expired (b) The Company has transferred the asset and substantially all the risks and rewards of the asset have been transferred (c) The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable including any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss.

B. Financial liabilities and equity a. Classification between liabilities or equity The Company classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, and an equity instrument.

b. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The transaction costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

c. Financial liabilities Financial liabilities within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

(a) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Gains or losses on the subsequent measurement of liabilities held for trading including interest paid are recognized in profit or loss.

- 38 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

A financial liability is classified as held for trading if: i. it is acquired or incurred principally for the purpose of selling or repurchasing it in short term; ii. on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or iii. it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial liability at fair value through profit or loss; or a financial liability may be designated as at fair value through profit or loss when doing so results in more relevant information, because either: i. it eliminates or significantly reduces a measurement or recognition inconsistency; or ii. a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

If the financial liabilities at fair value through profit or loss do not have quoted prices in an active market and their fair value cannot be reliably measured, then they are classified as financial liabilities measured at cost on balance sheet and carried at cost as at the reporting date.

(b) Financial liabilities at amortized cost Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

(c) Derecognition of financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

- 39 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

C. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

Derivative financial instrument The Company uses derivative financial instruments to hedge its foreign currency risks and interest rate risks. A derivative is classified in the balance sheet as financial assets or liabilities at fair value through profit or loss (held for trading) except for derivatives that are designated effective hedging instruments which are classified as derivative financial assets or liabilities for hedging.

Derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges and hedges of net investments in foreign operations, which is recognized in equity.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value though profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in profit or loss.

Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

A. In the principal market for the asset or liability; or B. In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants in their economic best interest.

- 40 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques which are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

Inventories Costs incurred in bringing each inventory to its present location and condition. Raw materials are valued at purchase cost. Finish goods and work in progress include cost of direct materials and related manufacturing overheads. Inventories are valued at lower of cost and net realizable value item by item. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Inventories that were not sold or moved for further production were assessed allowance and set aside to reflect the potential loss from stock obsolescence.

Investments accounted for using the equity method The Company’s investment in its associate is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Company has significant influence. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

Under the equity method, the investment in the associate or an investment in a joint venture is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Company’s share of net assets of the associate or joint venture. After the interest in the associate or joint venture is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. Unrealized gains and losses resulting from transactions between the Company and the associate or joint venture are eliminated to the extent of the Company’s related interest in the associate or joint venture.

When changes in the net assets of an associate or a joint venture occur and not those that are recognized in profit or loss or other comprehensive income and do not affect the Company’s percentage of ownership interests in the associate or joint venture, the Company recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate or joint venture on a pro rata basis.

- 41 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

When the associate or joint venture issues new shares, and the Company’s interest in an associate or a joint venture is reduced or increased as the Company fails to acquire shares newly issued in the associate or joint venture proportionately to its original ownership interest, the increase or decrease in the interest in the associate or joint venture is recognized in capital surplus and investments accounted for using the equity method. When the interest in the associate or joint venture is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Company disposes the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company.

The Company determines at each reporting date whether there is any objective evidence that the investment in the associate or an investment in a joint venture is impaired. If this is the case the Company calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognizes the amount in the ‘share of profit or loss of an associate’ in the statement of comprehensive income.

Upon loss of significant influence over the associate or joint venture, the Company measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss.

Property, plant and equipment Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 “Property, plant and equipment”. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

- 42 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings and facilities 3~50 years Machinery and equipment 3~8 years Computer and telecommunication equipment 3~5 years Testing equipment 3~5 years Miscellaneous equipment 2~10 years

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate, and are treated as changes in accounting estimates.

Investment property Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are measured using the cost model in accordance with the requirements of IAS 16 for that model, other than those that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings 40~50 years

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of derecognition.

Assets are transferred to or from investment properties when there is a change in use.

- 43 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Leases A. The Company as a lessee Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

B. The Company as a lessor The Company recognizes assets held under finance leases as lease receivables at an amount equal to the net investment in the lease. Direct costs incurred in connection with arranging a finance lease is included in net investment in the lease. The recognition of finance income is allocated over the lease term based on a pattern reflecting a constant periodic rate of return on net investment in the finance lease.

Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income.

Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss for the year in which the expenditure is incurred.

Expenditures related to research activities as well as those expenditures not meeting the criteria for capitalization are expensed when incurred. Expenditures related to development activities meeting the criteria for capitalization are capitalized.

The Company’s intangible assets mainly include trademarks, patents, software, customer relationship, IPs and others which are acquired from third parties or business combinations. A summary of the amortization policies applied to the Company’s intangible assets is as follows:

Customer Trademarks Patents Software relationship IPs and others 2~7 years 2~7 years 2~5 years 7~10 years 2~7 years

Abovementioned intangible assets are amortized on a straight-line basis over the estimated useful life.

- 44 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

The Company’s intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss.

Impairment of non-financial assets The Company assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 “Impairment of Assets” may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.

A cash generating unit, or groups of cash-generating units, to which goodwill has been allocated is tested for impairment annually at the same time, irrespective of whether there is any indication of impairment. If an impairment loss is to be recognized, it is first allocated to reduce the carrying amount of any goodwill allocated to the cash generating unit (group of units), then to the other assets of the unit (group of units) pro rata on the basis of the carrying amount of each asset in the unit (group of units). Impairment losses relating to goodwill cannot be reversed in future periods for any reason.

An impairment loss of continuing operations or a reversal of such impairment loss is recognized in profit or loss.

- 45 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Treasury shares Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity. Any difference between the carrying amount and the consideration is recognized in equity.

Revenue recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. The following specific recognition criteria must also be met before revenue is recognized:

A. Sale of goods Revenue from the sale of goods is recognized when all the following conditions have been satisfied: a. the significant risks and rewards of ownership of the goods have passed to the buyer; b. neither continuing managerial involvement nor effective control over the goods sold have been retained; c. the amount of revenue can be measured reliably; d. it is probable that the economic benefits associated with the transaction will flow to the entity; and e. the costs incurred in respect of the transaction can be measured reliably.

The amount of revenue is measured at the fair value of the consideration received or receivable taking into account the amount of any trade discounts and volume rebates allowed by entity. The Company estimates sales returns and allowance based on historical experience and other known factors at the time of sale, which reduces the operating revenue.

B. Interest income For all financial assets measured at amortized cost (including loans and receivables and held- to-maturity financial assets) and available-for-sale financial assets, interest income is recorded using the effective interest rate method and recognized in profit or loss.

C. Dividends Revenue is recognized when the Company’s right to receive the payment is established.

Post-employment benefits All regular employees of MTK and its domestic subsidiaries are entitled to a pension plan that is managed by an independently administered pension fund committee. Fund assets are deposited under the committee’s name in the specific bank account and hence, not associated with MTK and its domestic subsidiaries. Therefore, fund assets are not included in the Company’s consolidated financial statements. Pension benefits for employees of the overseas subsidiaries and the branches are provided in accordance with the respective local regulations.

- 46 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

For the defined contribution plan, MTK and its domestic subsidiaries will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognizes expenses for the defined contribution plan in the period in which the contribution becomes due. Overseas subsidiaries make contribution to the plan based on the requirements of local regulations.

Post-employment benefit plan that is classified as a defined benefit plan uses the Projected Unit Credit Method to measure its obligations and costs based on actuarial assumptions. Re- measurements, comprising of the effect of the actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets, excluding net interest, are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur. Past service costs are recognized in profit or loss on the earlier of: A. The date of the plan amendment or curtailment; and B. The date that the Company recognizes related restructuring or termination costs.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payment.

Share-based payment transactions The cost of equity-settled transactions between the Company and its employees is recognized based on the fair value of the equity instruments granted. The fair value of the equity instruments is determined by using an appropriate pricing model.

The cost of equity-settled transactions is recognized, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

No expense is recognized for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

- 47 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it fully vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substitutes for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

The cost of restricted shares issued is recognized as salary expense based on the fair value of the equity instruments on the grant date, together with a corresponding increase in other capital reserves in equity, over the vesting period. The Company recognizes unearned employee salary which is a transitional contra equity account; the balance in the account will be recognized as salary expense over the passage of vesting period. When the subsidiaries issue restricted shares, the equity variances made from treating as above accounting policy are attributable to non-controlling interests in the consolidated financial statements.

Income taxes Income tax expense (income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

A. Current income tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or equity and not in profit or loss.

Income tax on unappropriated earnings (excluding earnings from foreign consolidated subsidiaries) at a rate of 10% is expensed in the year the shareholders approved the appropriation of earnings which is the year subsequent to the year the earnings are generated.

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B. Deferred tax Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except: a. Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. b. In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except: a. Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. b. In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets are reassessed at each reporting date and are recognized accordingly.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

- 49 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Business combinations and goodwill Business combinations are accounted for using the acquisition method. The consideration transferred, the identifiable assets acquired and liabilities assumed are measured at acquisition date fair value. For each business combination, the acquirer measures any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are accounted for as expenses in the periods in which the costs are incurred and are classified under administrative expenses.

When the Company acquires a business, it assesses the assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at the acquisition- date fair value. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognized in accordance with IAS 39 “Financial Instruments: Recognition and Measurement” either in profit or loss or as a change to other comprehensive income. However, if the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity.

Goodwill is initially measured as the amount of the excess of the aggregate of the consideration transferred and the non-controlling interest over the net fair value of the identifiable assets acquired and the liabilities assumed. If this aggregate is lower than the fair value of the net assets acquired, the difference is recognized in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group of units to which the goodwill is so allocated represents the lowest level within the Company at which the goodwill is monitored for internal management purpose and is not larger than an operating segment before aggregation.

- 50 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Non-current assets held for sale Non-current assets or disposal groups are classified as held for sale if they are available for immediate sale in their present condition subject only to terms that are usual and customary for sale of such assets or disposal group and that are highly probable to complete within one year. Non- current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortized.

5. Significant Accounting Judgments, Estimates and Assumptions The preparation of the Company’s consolidated financial statements require management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. The judgments and estimates made by the Company are based on historical experience and other related factors and continuously being evaluated and adjusted. Please refer to below description:

Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

A. Fair value of financial instruments Where the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using valuation techniques including the income approach (for example the discounted cash flows model) or market approach. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to Note 12 for more details.

B. Valuation of inventory Inventories are stated at the lower of cost or net realizable value, and the Company uses judgment and estimate to determine the net realizable value of inventory at the end of each reporting period.

Due to the rapid technological changes, the Company estimates the net realizable value of inventory for obsolescence and unmarketable items at the end of reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions of future demand within a specific time period, therefore it may cause material adjustments.

- 51 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

C. Income tax Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could cause future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective company's domicile.

Deferred tax assets are recognized for all carryforward of unused tax losses and unused tax credits and deductible temporary differences to the extent that it is probable that taxable profit will be available or there are sufficient taxable temporary differences against which the unused tax losses, unused tax credits or deductible temporary differences can be utilized. The amount of deferred tax assets determined to be recognized is based upon the likely timing and the level of future taxable profits and taxable temporary differences together with future tax planning strategies.

D. Revenue recognition - sales returns and discounts The Company estimates sales returns and discounts based on historical experience and other known factors at the time of sale, which reduces the sales. The management periodically reviews the adequacy of the estimation used.

6. Contents of Significant Accounts (1) Cash and cash equivalents December 31, December 31, 2017 2016 Cash on hand and petty cash $ 5,845 $ 5,637 Checking and savings accounts 17,814,718 16,264,596 Time deposits 127,397,008 123,322,255 Cash equivalents - repurchase agreements 120,805 968,370 Total $ 145,338,376 $ 140,560,858

Time deposits include deposits whose maturities are within twelve months and are readily convertible to known amounts of cash with values subject to an insignificant risk of changes.

Cash and cash equivalents were not pledged.

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(2) Financial assets and financial liabilities at fair value through profit or loss December 31, December 31, 2017 2016 Current Held for trading financial assets Forward exchange contracts $ 27 $ 1,850

Financial assets designated upon initial recognition at

fair value through profit or loss Interest rate-linked deposits 269,987 - Credit-linked deposits 229,150 773,895 Bonds 225,343 - Exchange rate-linked deposits - 609,376 Index-linked deposits - 585,381 Subtotal 724,480 1,968,652 Total $ 724,507 $ 1,970,502

Held for trading financial liabilities Forward exchange contracts $ 18,144 $ 45,098

Noncurrent Financial assets designated upon initial recognition at fair value through profit or loss Credit-linked deposits $ 3,202,920 $ 2,747,046 Bonds 908,734 1,110,627 Interest rate-linked deposits 504,752 845,741 Index-linked deposits - 293,679 Total $ 4,616,406 $ 4,997,093

Financial assets at fair value through profit or loss were not pledged.

- 53 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

(3) Available-for-sale financial assets December 31, December 31, 2017 2016 Current Stocks $ 15,899,578 $ 4,941,140 Bonds 5,695,430 2,380,979 Funds 1,696,820 2,083,241 Depositary receipts - 23,314 Subtotal 23,291,828 9,428,674

Noncurrent Stocks 9,946,693 10,456,103 Funds 2,409,272 3,036,766 Bonds 1,989,679 5,421,848 Subtotal 14,345,644 18,914,717 Total $ 37,637,472 $ 28,343,391

The Company assessed and concluded its available-for-sale financial assets were partially impaired, and recorded an impairment loss of NT$63,520 thousand for the year ended December 31, 2017.

Investment in Shenzhen Huiding Technology Co., Ltd. accounted for using the equity method was reclassified to available-for-sale financial assets as the Company lost significant influence over it in the fourth quarter of 2016.

Available-for-sale financial assets were not pledged.

(4) Financial assets measured at cost December 31, December 31, 2017 2016 Available-for-sale financial assets-noncurrent Capital $ 7,651,545 $ 5,539,220 Non-publicly traded stocks 4,983,757 1,355,967 Total $ 12,635,302 $ 6,895,187

The Company assessed and concluded its financial assets measured at cost were partially impaired and recorded an impairment loss of NT$352,894 thousand and NT$71,172 thousand for the years ended December 31, 2017 and 2016, respectively.

Financial assets measured at cost were not pledged.

- 54 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

(5) Debt instrument investments for which no active market exists December 31, December 31, 2017 2016 Current Bonds $ 746,200 $ 1,486,607 Time deposits 19,245 18,885 Subtotal 765,445 1,505,492

Noncurrent Bonds 290,000 - Time deposits 107,880 257,928 Subtotal 397,880 257,928 Total $ 1,163,325 $ 1,763,420

Please refer to Note 8 for more details on debt instrument investments for which no active market exists under pledge.

(6) Trade receivables December 31, December 31, 2017 2016 Trade receivables $ 25,424,012 $ 27,828,309 Less: allowance for doubtful debts (331,984) (294,701) Less: allowance for sales returns and discounts (8,199,443) (7,055,613) Total $ 16,892,585 $ 20,477,995

Trade receivables were not pledged.

Trade receivables are generally on 30-150 day terms. The movements in the provision for impairment of trade receivables are as follows (please refer to Note 12 for credit risk disclosure): Individually Collectively

impaired impaired Total As of January 1, 2017 $ - $ 294,701 $ 294,701 Charge for the current period - 52,612 52,612 Write-off for uncollectable accounts - (10,702) (10,702) Exchange differences - (4,627) (4,627) As of December 31, 2017 $ - $ 331,984 $ 331,984

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Individually Collectively

impaired impaired Total As of January 1, 2016 $ - $ 363,564 $ 363,564 Reversal for the current period - (125,735) (125,735) Write-off for uncollectable accounts - (9,484) (9,484) Acquired through business - 66,452 66,452 combinations Exchange differences - (96) (96) As of December 31, 2016 $ - $ 294,701 $ 294,701

Aging analysis of trade receivables were as follows: Past due but not impaired Neither past due More than As of nor impaired 1 to 90 days 91 days Total December 31, 2017 $ 15,926,656 $ 965,084 $ 845 $ 16,892,585 December 31, 2016 $ 19,232,040 $ 1,245,723 $ 232 $ 20,477,995

The Company entered into several factoring agreements without recourse with financial institutions. According to those agreements, the Company does not take the risk of uncollectible trade receivables, but only the risk of loss due to commercial disputes. The Company did not provide any collateral, and the factoring agreements met the criteria of financial asset derecognition. The Company derecognized related trade receivables after deducting the estimated value of commercial disputes. Receivables from banks due to factoring agreement were NT$2,515,843 thousand and NT$2,084,674 thousand as of December 31, 2017 and 2016, respectively.

As of December 31, 2017 and 2016, trade receivables derecognized were as follows:

A. As of December 31, 2017: Trade receivables Cash The Factor Interest derecognized withdrawn Unutilized Credit line (Transferee) rate (US$’000) (US$’000) (US$’000) (US$’000) Taishin International Bank - $ 57,076 $ - $ 57,076 $ 99,000 BNP Paribas - 12,587 - 12,587 107,000 HSBC - 11 - 11 350 Taipei Fubon Commercial Bank - 14,615 - 14,615 15,000 Total $ 84,289 $ - $ 84,289 $ 221,350

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B. As of December 31, 2016: Trade receivables Cash The Factor Interest derecognized withdrawn Unutilized Credit line (Transferee) rate (US$’000) (US$’000) (US$’000) (US$’000) Taishin International Bank - $ 44,721 $ - $ 44,721 $ 108,549 BNP Paribas - 19,684 - 19,684 85,000 HSBC - 66 - 66 500 TC Bank - 112 - 112 300 ING Bank - - - - 75,000 Total $ 64,583 $ - $ 64,583 $ 269,349

(7) Inventories December 31, December 31, 2017 2016 Raw materials $ 2,601,306 $ 2,896,421 Work in progress 11,839,039 17,056,723 Finished goods 12,099,269 13,969,770 Net amount $ 26,539,614 $ 33,922,914

For the years ended December 31, 2017 and 2016, the cost of inventories recognized in expenses amounted to NT$153,330,436 thousand and NT$177,321,882 thousand, including the write-down of inventories of NT$5,753,615 thousand and NT$2,240,185 thousand for the years ended December 31, 2017 and 2016, respectively.

Inventories were not pledged.

(8) Prepayments December 31, December 31, 2017 2016 Prepaid expenses $ 534,954 $ 447,418 Input tax 235,532 406,737 Others 619,946 651,066 Total $ 1,390,432 $ 1,505,221

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(9) Investments accounted for using the equity method Details of investments in associates and jointly controlled entities are as follows: December 31, 2017 December 31, 2016 Percentage Percentage Carrying of ownership Carrying of ownership Investees amount (%) amount (%) Investments in associates: MOUNTAIN CAPITAL

FUND, L.P. $ 810,527 42 $ 876,839 49 FONTAINE CAPITAL FUND, L.P. 569,146 57 575,546 55 Airoha Technology Corp. - - 614,920 26 Others 530,159 - 610,373 - Subtotal 1,909,832 2,677,678

Investments in jointly controlled entities: Yuan Ke (Pingtan) Investment Fund Limited Partnership 3,867,272 81 3,228,117 77 Subtotal 3,867,272 3,228,117 Total $ 5,777,104 $ 5,905,795

Subsidiary Hsu-Si Investment acquired 24,230,620 shares (approximately 40% of Airoha’s issued shares) of Airoha through a tender offer for the three months ended March 31, 2017. The price of the tender offer was NT$110 per share and the total amount paid in cash amounted to NT$2,665,368 thousand. Hsu-Si Investment obtained control over Airoha in March 2017 and Airoha was included in the consolidated entities thereafter. Please refer to Note 6. (29) for more details.

The Company invested in Yuan Ke (Pingtan) Investment Fund Limited Partnership in 2016. Yuan Ke (Pingtan) Investment Fund Limited Partnership is accounted for using equity method as the Company has no control over it.

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The Company’s investments in associates and jointly controlled entities were not individually material. The following table summarizes financial information of the Company’s ownership in the associates and jointly controlled entities:

(1) Investments in associates For the years ended December 31 2017 2016 (Loss) profit from continuing operations $ (13,650) $ 765,510 Other comprehensive income (post-tax) 6,693 (14,037) Total comprehensive income $ (6,957) $ 751,473

(2) Investments in jointly controlled entities For the years ended December 31 2017 2016 Profit (loss) from continuing operations $ 476,047 $ (2,306) Other comprehensive income (post-tax) - - Total comprehensive income $ 476,047 $ (2,306)

The associates and jointly controlled entities had no contingent liabilities or capital commitments and investments in associates and jointly controlled entities were not pledged as of December 31, 2017 and 2016.

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(10) Property, plant and equipment Construction in Computer and progress and

Buildings and Machinery telecommunication Testing Miscellaneous equipment awaiting Land facilities equipment equipment equipment equipment examination Total Cost: As of January 1, 2017 $ 5,108,639 $ 21,282,705 $ 1,210,479 $ 5,000,627 $ 6,861,389 $ 2,284,831 $ 6,036,276 $ 47,784,946 Additions-acquired separately 86,980 593,228 100,699 1,077,842 1,000,815 442,229 784,097 4,085,890 Additions-acquired through - - 98,294 - - 16,906 - 115,200 business combinations Disposals - (4,356) (4,859) (327,897) (209,998) (487,995) (17,371) (1,052,476) Transfers 1,089 5,449,594 25,376 (4,287) (22,398) 91,768 (5,885,816) (344,674) Exchange differences (3) (108,553) (4,936) (56,868) (27,634) (42,110) (70,760) (310,864) As of December 31, 2017 $ 5,196,705 $ 27,212,618 $ 1,425,053 $ 5,689,417 $ 7,602,174 $ 2,305,629 $ 846,426 $ 50,278,022

As of January 1, 2016 $ 5,123,337 $ 15,806,035 $ 788,085 $ 4,351,303 $ 5,989,356 $ 2,014,817 $ 9,351,757 $ 43,424,690 Additions-acquired separately 11,405 2,020,423 303,280 1,144,287 982,810 512,127 1,420,336 6,394,668 Additions-acquired through 142,453 607,570 134,893 - 54,211 30,528 16,080 985,735 business combinations Disposals - (87,632) (5,144) (305,934) (246,582) (176,553) - (821,845) Transfers (168,559) 3,455,583 (8,276) (28,829) 292,111 (26,411) (3,999,239) (483,620) Exchange differences 3 (519,274) (2,359) (160,200) (210,517) (69,677) (752,658) (1,714,682) As of December 31, 2016 $ 5,108,639 $ 21,282,705 $ 1,210,479 $ 5,000,627 $ 6,861,389 $ 2,284,831 $ 6,036,276 $ 47,784,946

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Construction in Computer and progress and Buildings and Machinery telecommunication Testing Miscellaneous equipment awaiting Land facilities equipment equipment equipment equipment examination Total Depreciation and impairment: As of January 1, 2017 $ - $ 2,903,910 $ 271,703 $ 2,772,783 $ 3,700,970 $ 1,277,840 $ - $ 10,927,206 Depreciation - 657,038 263,512 989,383 1,038,710 591,237 - 3,539,880 Disposals - (3,442) (4,683) (316,705) (204,754) (480,093) - (1,009,677) Transfers - (10,797) 6,597 (4,276) (25,139) 615 - (33,000) Exchange differences - (3,160) (1,387) (33,420) (13,518) (33,542) - (85,027) As of December 31, 2017 $ - $ 3,543,549 $ 535,742 $ 3,407,765 $ 4,496,269 $ 1,356,057 $ - $ 13,339,382

As of January 1, 2016 $ - $ 2,491,917 $ 80,014 $ 2,326,856 $ 3,178,509 $ 957,317 $ - $ 9,034,613 Depreciation - 513,924 199,786 860,368 909,347 575,939 - 3,059,364 Disposals - (37,566) (3,714) (296,656) (236,583) (163,796) - (738,315) Transfers - (33,908) (2,898) (11,387) (6,820) (30,750) - (85,763) Exchange differences - (30,457) (1,485) (106,398) (143,483) (60,870) - (342,693) As of December 31, 2016 $ - $ 2,903,910 $ 271,703 $ 2,772,783 $ 3,700,970 $ 1,277,840 $ - $ 10,927,206

Net carrying amount as of: December 31, 2017 $ 5,196,705 $ 23,669,069 $ 889,311 $ 2,281,652 $ 3,105,905 $ 949,572 $ 846,426 $ 36,938,640 December 31, 2016 $ 5,108,639 $ 18,378,795 $ 938,776 $ 2,227,844 $ 3,160,419 $ 1,006,991 $ 6,036,276 $ 36,857,740

Please refer to Note 8 for more details on property, plant and equipment under pledge.

- 61 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

(11) Investment property Land Buildings Total Cost: As of January 1, 2017 $ 199,661 $ 490,073 $ 689,734 Addition - 1,436 1,436 Transfers 1,875 253,368 255,243 Exchange differences - (5,603) (5,603) As of December 31, 2017 $ 201,536 $ 739,274 $ 940,810

As of January 1, 2016 $ 218,885 $ 56,857 $ 275,742 Addition 475 257 732 Transfers (19,699) 432,959 413,260 As of December 31, 2016 $ 199,661 $ 490,073 $ 689,734

Depreciation and impairment: As of January 1, 2017 $ - $ 38,326 $ 38,326 Depreciation - 18,142 18,142 Transfers - 10,915 10,915 Exchange differences - (224) (224) As of December 31, 2017 $ - $ 67,159 $ 67,159

As of January 1, 2016 $ - $ 152 $ 152 Depreciation - 2,014 2,014 Transfers - 36,198 36,198 Exchange differences - (38) (38) As of December 31, 2016 $ - $ 38,326 $ 38,326

Net carrying amount as of: December 31, 2017 $ 201,536 $ 672,115 $ 873,651 December 31, 2016 $ 199,661 $ 451,747 $ 651,408

- 62 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

For the years ended December 31, 2017 2016 Rental income from investment properties $ 75,014 $ 11,613 Less: Direct operating expenses from investment properties generating rental income (18,142) (2,014) Total $ 56,872 $ 9,599

Please refer to Note 8 for more details on investment properties under pledge.

The following fair value has been determined at balance sheet date partially based on comparative approach, and partially based on the weighted average calculation of comparative approach and income approach valuations, which were performed by an independent valuer. The significant assumptions and the fair value are as follows:

Based on comparative approach: December 31, December 31, 2017 2016 Fair value $ 1,136,818 $ 697,311

Based on comparative approach and income December 31, December 31, approach: 2017 2016 Fair value $ 262,578 $ 254,334 Income capitalization rate 0.89%-2.64% 1.23%-2.67%

- 63 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

(12) Intangible assets Customer Patents, IPs and Trademarks Software relationship others Goodwill Total Cost: As of January 1, 2017 $ 772,487 $ 2,015,534 $ 5,114,146 $ 8,716,232 $ 63,386,805 $ 80,005,204 Additions-acquired separately - 934,627 - 3,418,503 - 4,353,130 Additions-acquired through business - 53,514 - 1,304,913 2,039,366 3,397,793 combinations Disposals - (26,983) - (3,606,986) - (3,633,969) Transfers - 1,848 - - 64,130 65,978 Exchange differences - (1,407) - (189,747) (43,376) (234,530) As of December 31, 2017 $ 772,487 $ 2,977,133 $ 5,114,146 $ 9,642,915 $ 65,446,925 $ 83,953,606

As of January 1, 2016 $ 772,487 $ 1,780,819 $ 5,106,265 $ 8,560,262 $ 63,402,900 $ 79,622,733 Additions-acquired separately - 220,874 - 146,038 - 366,912 Additions-acquired through business - 23,297 - 73,618 161 97,076 combinations Disposals - (3,566) - (1,791) - (5,357) Transfers - (4,247) 7,881 (1,745) (238) 1,651 Exchange differences - (1,643) - (60,150) (16,018) (77,811) As of December 31, 2016 $ 772,487 $ 2,015,534 $ 5,114,146 $ 8,716,232 $ 63,386,805 $ 80,005,204

- 64 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Customer Patents, IPs and Trademarks Software relationship others Goodwill Total Amortization and impairment: As of January 1, 2017 $ 279,595 $ 1,549,914 $ 1,441,288 $ 4,719,853 $ - $ 7,990,650 Amortization 112,599 520,212 676,979 2,342,537 - 3,652,327 Disposals - (26,396) - (3,606,986) - (3,633,382) Exchange differences - 1,238 - (86,307) - (85,069) As of December 31, 2017 $ 392,194 $ 2,044,968 $ 2,118,267 $ 3,369,097 $ - $ 7,924,526

As of January 1, 2016 $ 166,996 $ 1,138,028 $ 801,037 $ 2,085,999 $ - $ 4,192,060 Amortization 112,599 410,984 640,251 2,670,866 - 3,834,700 Disposals - (2,657) - (1,791) - (4,448) Transfers - 30 - (968) - (938) Exchange differences - 3,529 - (34,253) - (30,724) As of December 31, 2016 $ 279,595 $ 1,549,914 $ 1,441,288 $ 4,719,853 $ - $ 7,990,650

Net carrying amount as of: December 31, 2017 $ 380,293 $ 932,165 $ 2,995,879 $ 6,273,818 $ 65,446,925 $ 76,029,080 December 31, 2016 $ 492,892 $ 465,620 $ 3,672,858 $ 3,996,379 $ 63,386,805 $ 72,014,554

- 65 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

(13) Impairment testing of goodwill The Company’s goodwill allocated to each of cash-generating units or groups of cash- generating units is expected to benefit from synergies of the business combination. Key assumptions used in impairment testing are as follows:

The recoverable amount of the cash-generating unit is determined based on the value-in-use calculated using cash flow projections discounted by the pre-tax discount rate from financial budgets approved by management covering a five-year period. The projected cash flows reflect the change in demand for products and services. As a result of the analysis, the Company did not identify any impairment for the goodwill of NT$65,446,925 thousand.

Key assumptions used in value-in-use calculations The calculation of value-in-use for the cash-generating unit is most sensitive to the following assumptions: (a) Gross margin (b) Discount rates (c) Growth rates of sales of budget period

Gross margins - Gross margins are based on the gross margins of latest fiscal year and future trend of the market.

Discount rates - Discount rates reflect the current market assessment of the risks specific to each cash generating unit (including the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted). The discount rate was estimated based on the weighted average cost of capital (WACC) for the Company, taking into account the particular situations of the Company and its operating segments. The WACC includes both the cost of liabilities and cost of equity. The cost of equity is derived from the expected returns of the Company’s investors on capital, where the cost of liabilities is measured by the interest bearing loans that the Company has obligation to settle.

Growth rates of sales estimates - The growth rate of sales were estimated by historical experience. The long-term average growth rate the Company predicted was adjusted by considering the product life cycle and the macroeconomic environment.

Sensitivity to changes in assumptions With regard to the assessment of value-in-use of the cash-generating unit, the Company believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount.

- 66 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

(14) Long-term lease receivables The Company had entered into machinery lease agreements in 2016, which was accounted for as a finance lease, and the lease term was from May 27, 2016 to December 31, 2019. The Company terminated the finance lease agreements in advance in the first quarter of 2017, and transferred ownership of lease machinery to the lessee. The Company did not recognize any gains and losses due to termination of the agreements. The details of long-term lease receivables as of December 31, 2016 are as follows:

Present value Present value Gross Unrealized of of minimum investment in finance unguaranteed lease payments the lease income residual value receivables

Not later than one year $ - $ - $ - $ - Later than one year but

not later than five years 222,264 11,127 - 211,137 Total $ 222,264 $ 11,127 $ - $ 211,137

Estimated unguaranteed residual value of finance lease is NT$0.

There were no long-term lease receivables for the year ended December 31, 2017.

(15) Short-term borrowings December 31, December 31, 2017 2016 Unsecured bank loans $ 64,315,682 $ 54,523,984 Interest rates 1.66~5% 0.85~1.94%

(16) Other payables December 31, December 31, 2017 2016 Accrued salaries and bonuses $ 18,688,236 $ 19,205,041 Accrued royalties 1,836,863 2,208,453 Others 15,271,191 12,524,501 Total $ 35,796,290 $ 33,937,995

- 67 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

(17) Long-term borrowings Details of long-term loans as of December 31, 2017 are as follows: As of December 31, Interest Lenders 2017 Rate (%) Maturity date and terms of repayment Unsecured long-term loan from $ 11,667 1.79% Effective from May 10, 2018, principle is Mega International Commercial repaid in 21 quarterly payments with Bank monthly interest payments. Secured long-term loan from Mega 85,000 1.79% Effective from May 10, 2018, principle is International Commercial Bank repaid in 21 quarterly payments with monthly interest payments. Secured long-term loan from Shin 276,375 1.40% Effective from October 30, 2017, principle is Kong Bank repaid in 16 semi-annually payments with monthly interest payments. Total 373,042 Less: current portion (36,850) Noncurrent portion $ 336,192

Details of long-term loans as of December 31, 2016 are as follows: As of December 31, Interest Lenders 2016 Rate (%) Maturity date and terms of repayment Unsecured long-term loan from $ 15,000 1.79% Effective from May 10, 2018, principle is Mega International Commercial repaid in 21 quarterly payments with Bank monthly interest payments. Secured long-term loan from Mega 109,286 1.79% Effective from May 10, 2018, principle is International Commercial Bank repaid in 21 quarterly payments with monthly interest payments. Secured long-term loan from Shin 294,800 1.40% Effective from October 30, 2017, principle is Kong Bank repaid in 16 semi-annually payments with monthly interest payments. Total 419,086 Less: current portion (18,425) Noncurrent portion $ 400,661

Please refer to Note 8 for more details on long-term loans under pledge.

- 68 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

(18) Post-employment benefits plans Defined contribution plan MTK and its domestic subsidiaries adopt a defined contribution plan in accordance with the Labor Pension Act of the R.O.C. MTK and its domestic subsidiaries have made monthly contributions of 6% of each individual employee’s salaries or wages to employees’ pension accounts. Subsidiaries located in the People’s Republic of China will contribute social welfare benefits based on a certain percentage of employees’ salaries or wages to the employees’ individual pension accounts. Pension benefits for employees of foreign subsidiaries are provided in accordance with the local regulations.

Pension expenses under the defined contribution plan for the years ended December 31, 2017 and 2016 were NT$1,611,309 thousand and NT$1,565,151 thousand, respectively.

Defined benefits plan MTK and its domestic subsidiaries adopt a defined benefit plan in accordance with the Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the units of service years and the average salaries in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year. The total units shall not exceed 45 units. Under the Labor Standards Act, MTK and its domestic subsidiaries contribute an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of the administered pension fund committee.

The Ministry of Labor is in charge of establishing and implementing the fund utilization plan in accordance with the regulations for revenues, expenditures, safeguard and utilization of the labor retirement fund. The pension fund is invested in-house or under mandation, based on a passive-aggressive investment strategy for long-term profitability. The Ministry of Labor establishes risk management mechanism based on the assessment of risk factors including market risk, credit risk and liquidity risk, in order to maintain adequate flexibility to achieve targeted return without over-exposure of risk. With regard to utilization of the pension fund, the minimum earnings in the annual distributions on the final financial statement shall not be less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. Treasury funds can be used to cover the deficits after the approval of the competent authority. As the Company does not participate in the operation and management of the pension fund, no disclosure on the fair value of the plan assets categorized in different classes could be made in accordance with IAS 19. The Company expects to contribute NT$8,187 thousand to its defined benefit plan during the 12 months beginning after December 31, 2017.

The weighted average duration of the defined benefit obligation was 11 to 24 years and 12 to 23 years as of December 31, 2017 and 2016, respectively.

- 69 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Pension costs recognized in profit or loss are as follows: For the years ended December 31 2017 2016 Current service cost $ 8,570 $ 7,767 Net interest on the net defined benefit liabilities 15,092 14,727 Subtotal 23,662 22,494 Overestimate on book 1,627 956 Total $ 25,289 $ 23,450

Reconciliations of liabilities (assets) of the defined benefit obligation and plan assets at fair value are as follows: December 31, December 31, 2017 2016 Defined benefit obligation $ 924,450 $ 1,087,733 Plan assets at fair value (268,747) (250,449) Subtotal 655,703 837,284 (Underestimate) overestimate on book (711) 977 Subtotal 654,992 838,261 Net defined benefit assets 2,080 2,070 Net defined benefit liabilities $ 657,072 $ 840,331

- 70 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Reconciliations of liabilities (assets) of the defined benefit plan are as follows: Defined benefit Plan assets at Net defined benefit obligation fair value liabilities (assets) As of January 1, 2017 $ 1,087,733 $ (250,449) $ 837,284 Current service cost 8,570 - 8,570 Interest expenses (income) 19,555 (4,463) 15,092 Subtotal 28,125 (4,463) 23,662 Remeasurements of the defined benefit liabilities/assets: Actuarial gains and losses arising from changes in demographic assumptions 1,208 - 1,208 Actuarial gains and losses arising from changes in financial assumptions (158,134) - (158,134) Experience adjustments (50,771) - (50,771) Remeasurements of the defined benefit assets - 2,078 2,078 Subtotal (207,697) 2,078 (205,619) Payment of benefit obligation (8,249) 15,329 7,080 Contributions by employer - (21,952) (21,952) Acquired through business combinations 24,538 (9,290) 15,248 Subtotal 924,450 (268,747) 655,703 Underestimate on book (711) - (711) As of December 31, 2017 $ 923,739 $ (268,747) $ 654,992

Defined benefit Plan assets at Net defined benefit obligation fair value liabilities (assets) As of January 1, 2016 $ 992,500 $ (237,129) $ 755,371 Current service cost 8,723 - 8,723 Interest expenses (income) 18,783 (4,056) 14,727 Past service cost and gains and losses arising from settlements (956) - (956) Subtotal 26,550 (4,056) 22,494 Remeasurements of the defined benefit liabilities/assets: Actuarial gains and losses arising from changes in demographic assumptions (23,553) - (23,553) Actuarial gains and losses arising from changes in financial assumptions 140,480 - 140,480 Experience adjustments (53,360) - (53,360) Remeasurements of the defined benefit assets - 1,935 1,935 Subtotal 63,567 1,935 65,502 Contributions by employer - (10,620) (10,620) Acquired through business combinations 5,116 (579) 4,537 Subtotal 1,087,733 (250,449) 837,284 Overestimate on book 977 - 977 As of December 31, 2016 $ 1,088,710 $ (250,449) $ 838,261

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The principal assumptions used in determining the Company’s defined benefit plan are shown below: December 31, December 31,

2017 2016 Discount rate 1.00%~4.00% 1.50%~2.00% Expected rate of salary increases 2.00%~5.00% 2.00%~5.00%

Sensitivity analysis for significant assumption are shown below: For the years ended December 31 2017 2016 Defined Defined Defined Defined benefit benefit benefit benefit obligation obligation obligation obligation increase decrease increase decrease Discount rate increases by 0.5% $ $ (75,903) $ - $ (99,211) Discount rate decreases by 0.5% 85,116 110,784 - Rate of future salary increases by 0.5% 83,917 108,172 - Rate of future salary decreases by 0.5% (76,179) - (98,004)

The sensitivity analysis above are based on a change in a significant assumption (for example: change in discount rate or future salary), keeping all other assumptions constant. The sensitivity analysis may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another.

There was no change in the methods and assumptions used in preparing the sensitivity analysis compared to the previous period.

(19) Equity A. Share capital MTK’s authorized capital as of December 31, 2017 and 2016 was NT$20,000,000 thousand, divided into 2,000,000,000 shares (including 20,000,000 shares reserved for exercise of employee stock options at each period), each at a par value of NT$10. MTK’s issued capital was NT$15,814,140 thousand, and NT$15,821,122 thousand, divided into 1,581,413,973 shares, and 1,582,112,191 shares as of December 31, 2017 and 2016, respectively. Each share has one voting right and a right to receive dividends.

MTK issued 23,142 new shares for the year ended December 31, 2017, at par value of NT$10 for exercising employee stock options. The aforementioned new issued shares (NT$231 thousand in the amount) were not yet registered and therefore were classified as capital collected in advance as of December 31, 2017.

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On June 24, 2016, the general shareholders’ meeting approved to issue restricted stocks for employees. 10,828,505 shares of restricted stocks for employees were issued as of December 31, 2017. Relevant regulators’ approvals have been obtained and related registration processes have been completed.

MTK has redeemed 998,218 shares of issued restricted stocks for employees during the year ended December 31, 2017, among which 952,908 shares have been cancelled. Relevant regulators’ approvals have been obtained and related registration processes have been completed.

B. Capital surplus December 31, December 31, 2017 2016 Additional paid-in capital $ 83,765,699 $ 85,867,533 Treasury share transactions 1,529,750 1,455,706 Changes in ownership interests in subsidiaries 1,146,807 176,894 Donated assets 1,261 1,261 From share of changes in net assets of associates 4,326 29,475 Employee stock options 498,474 513,409 Restricted stocks for employees 1,129,630 1,660,064 Others 134,872 111,014 Total $ 88,210,819 $ 89,815,356

According to the Company Act, the capital surplus shall not be used except for offset the deficit of the company. When a company incurs no loss, it may distribute the capital surplus generated from the excess of the issuance price over the par value of share capital (including the shares issued for mergers and the surplus from treasury shares transactions) and donations. The distribution could be made in cash or in the form of dividend shares to its shareholders in proportion to the number of shares being held by each of them.

C. Treasury shares As of December 31, 2017 and 2016, 7,794,085 shares of MTK’s common shares amounting to NT$55,970 thousand were held by the subsidiary, MediaTek Capital Corp. These shares held by MediaTek Capital Corp. were acquired for the purpose of financing before the amendment of the Company Act on November 12, 2001.

As of December 31, 2017 and 2016, MTK did not hold any other treasury shares.

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D. Retained earnings and dividend policy According to MTK’s Articles of Incorporation, current year’s earnings, if any, shall be distributed in the following order: a. Reserve for tax payments; b. Offset accumulated losses in previous years, if any; c. Legal reserve, which is 10% of leftover profits. However, this restriction does not apply in the event that the amount of the accumulated legal reserve equals or exceeds the Company’s total capital stock; d. Allocation or reverse of special reserves as required by law or government authorities; e. The remaining net profits and the retained earnings from previous years will be allocated as shareholders’ dividend. The Board of Directors will prepare a distribution proposal and submit the same to the shareholders’ meeting for review and approval by a resolution.

Shareholders’ dividends may be distributed in the form of shares or cash and cash dividends to be distributed may not be less than 10% of total dividends to be distributed.

According to the Company Act, MTK needs to set aside amount to legal reserve unless where such legal reserve amounts to the total authorized capital. The legal reserve can be used to offset the deficit of MTK. When MTK incurs no loss, it may distribute the portion of legal reserve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

Pursuant to existing regulations, MTK is required to set aside additional special reserve equivalent to the net debit balance of the other components of shareholders’ equity. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reversed may be distributed.

Following the adoption of TIFRS, the FSC on April 6, 2012 issued Order No. Financial- Supervisory-Securities-Corporate-1010012865, which sets out the following provisions for compliance:

On a public company's first-time adoption of the TIFRS, for any unrealized revaluation gains and cumulative translation adjustments (gains) recorded to shareholders’ equity that the company elects to transfer to retained earnings by application of the exemption under IFRS 1, the company shall set aside an equal amount of special reserve. Following a company’s adoption of the TIFRS for the preparation of its financial reports, when distributing distributable earnings, it shall set aside to special reserve based on the difference between the amount already set aside and the total debit balance of other shareholders’ equity. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reversed may be distributed.

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As of January 1, 2013, special reserve set aside for the first-time adoption of TIFRS amounted to nil.

Details of the 2016 and 2015 earnings distribution and dividends per share as resolved by general shareholders’ meeting on June 15, 2017 and June 24, 2016, respectively, are as follows: Appropriation of earnings Dividends per share (NT$) 2016 2015 2016 2015 Legal reserve $ 2,370,060 $ 2,595,843 - - Cash dividends-common stock 12,652,827 17,287,421 $ 8.00 $ 11.00 Total $ 15,022,887 $ 19,883,264

In addition, the general shareholders’ meeting on June 15, 2017 resolved to distribute the paid in capital by cash in the amount of NT$2,372,405 thousand or NT$1.5 per share.

E. Non-controlling interests For the years ended December 31 2017 2016 Beginning balance $ 1,883,968 $ 6,659,159 (Losses) gains attributable to non-controlling

interests (262,506) 329,934 Other comprehensive (losses) income, attributable to

non-controlling interests, net of tax: Exchange differences resulting from translating the

financial statements of foreign operations (5,945) (71,478) Share-based payment transactions 15,072 - Changes in ownership interests in subsidiaries 1,028,273 220,048 Acquisition through business combinations 1,424,763 - Acquisition of additional interest in a subsidiary (980,110) (6,126,135) Others (1,716,145) 872,440 Ending balance $ 1,387,370 $ 1,883,968

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(20) Share-based payment plans Certain employees of the Company are entitled to share-based payment as part of their remunerations. Services are provided by the employees in return for the equity instruments granted. These plans are accounted for as equity-settled share-based payment transactions.

Share-based payment plans in MTK In December 2007, July 2009, May 2010, August 2011, August 2012 and August 2013, MTK was authorized by the FSC, Executive Yuan, to issue employee stock options of 5,000,000 units, 3,000,000 units, 3,500,000 units, 3,500,000 units, 3,500,000 units and 3,500,000 units, respectively, each unit eligible to subscribe for one common share. The options may be granted to qualified employees of MTK or any of its domestic or foreign subsidiaries, in which MTK’s shareholding with voting rights, directly or indirectly, is more than fifty percent. The options are valid for ten years and exercisable at certain percentage subsequent to the second anniversary of the granted date. Under the terms of the plan, the options are granted at an exercise price equal to the closing price of MTK’s common shares listed on the Taiwan Stock Exchange Corporation (“TWSE”) on the grant date.

Detail information relevant to the share-based payment plan as of December 31, 2017 is as follows: Total number of Total number of Shares available for Exercise price Date of grant options granted options outstanding option holders (NT$) (Note) 2008.03.31 1,134,119 229,086 229,086 $ 355.5 2008.08.28 1,640,285 406,851 406,851 342.1 2009.08.18 1,382,630 487,756 487,756 426.5 2010.08.27 1,605,757 621,001 621,001 402.0 2010.11.04 65,839 8,134 8,134 374.4 2011.08.24 2,109,871 1,038,401 1,038,401 275.5 2012.08.14 1,346,795 832,714 832,714 284.8 2013.08.22 1,436,343 1,057,160 1,057,160 368.0

Note: The exercise prices have been adjusted to reflect the change of outstanding shares (e.g. the share issued for cash, the appropriations of earnings, issuance of new shares in connection with merger, or issuance of new shares to acquire shares of other companies) in accordance with the plan.

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The compensation cost was recognized under the fair value method and the Black-Scholes Option Pricing model was used to estimate the fair value of options granted. Assumptions used in calculating the fair value are disclosed as follows:

Employee Stock Option Expected dividend yield (%) 2.43%~6.63% Expected volatility (%) 32.9%~50.06% Risk free interest rate (%) 0.93%~2.53% Expected life (Years) 6.5 years

The expected life of the share options is based on historical data and current expectations and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may also not necessarily be the actual outcome.

The following table contains further details on the aforementioned share-based payment plan:

For the years ended December 31 2017 2016 Weighted-average Weighted-average Options Exercise Price Options Exercise Price Employee Stock Option (Unit) per Share (NT$) (Unit) per Share (NT$) Outstanding at beginning of year 4,923,268 $ 339.9 5,461,752 $ 341.8 Granted - - - - Exercised (Note) (23,142) 278.5 - - Forfeited (Expired) (219,023) 332.9 (538,484) 341.6 Outstanding at end of year 4,681,103 340.4 4,923,268 339.9 Exercisable at end of year 4,681,103 4,476,671 Weighted-average fair value of options granted during the year (in NT$) $ - $ -

Note：The weighted average share price at the date of exercise of those options was NT$331.8 for the year ended December 31, 2017.

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The information on the outstanding share-based payment plan as of December 31, 2017 and 2016 is as follows: December 31, December 31, 2017 2016 Outstanding stock options Outstanding stock options Weighted- Weighted- Weighted- Weighted- average average average average Expected Exercise Price Expected Exercise Price Range of Exercise Remaining per Share Remaining per Share Date of grant Price (NT$) Years (NT$) Years (NT$) 2007.12.19 $ 342.1~355.5 - $ 346.9 - $ 347.1 2009.07.27 426.5 - 426.5 - 426.6 2010.05.10 374.4~402.0 - 401.6 0.17 401.8 2011.08.09 275.5 0.17 275.5 1.17 275.6 2012.08.09 284.8 1.13 284.8 2.13 284.9 2013.08.09 368 2.17 368.0 3.17 368.0

Restricted stocks plan for employees of MTK On June 24, 2016, the shareholders’ meeting approved to issue gratuitous restricted stocks for employees, at a total of 17,500,000 common shares. MTK shall set up the actual issuance date(s) in one tranche or in installments within one year from the date of receipt of the effective registration of the competent authority. The issuance process was granted effective registration by the securities authority.

MTK has issued 10,528,505 and 300,000 gratuitous restricted stocks on September 6, 2016 and July 17, 2017, respectively. The issuance process was granted effective registration by the securities authority.

The fair value of the restricted stocks issued was NT$254.5 per share. The estimated compensation expense amounted to NT$1,492,340 thousand in total based on the vesting conditions and will be recognized during the vesting period. As of December 31, 2017, MTK had recognized NT$894,525 thousand as compensation expense and NT$597,815 thousand as unearned employee compensation, which were recorded under salary expense and other equity, respectively.

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Restriction on the rights and vesting conditions of restricted stocks for employees of 2016 is as follows: A. To issue common shares of MTK with gratuitous issue price. B. Employee's continuous employment with the Company through the vesting dates, with no violation on any terms of the Company’s employment agreement, employee handbook, or policies and achievement of both personal performance criterion and the Company’s operation objectives during the vesting period, are eligible to receive the vested shares. The maximum portions of the vesting shares of each year are 15%, 35%, and 50% for the years ended 2017, 2018, and 2019, respectively. The actual portions of the vesting shares shall be determined by achievement of both personal performance and the Company’s operation objectives. C. During the vesting period, employees may not sell, pledge, transfer, give to another person, create any encumbrance on, or otherwise dispose of, restricted employee shares, excluding inheritance. D. During the vesting period, the rights of attending shareholders’ meeting, proposal, speech, resolution and voting right, etc., and other rights of restricted stock plan for employees, including but not limited to, dividends, bonuses, the distribution rights of legal reserve and capital surplus, the right to subscription of new shares, etc., are the same as the common shares issued by MTK. E. The restricted stock for employees issued by MTK may be deposited in a security trust account.

Share-based payment plans of Subsidiaries In November 2014, Board of Directors of EcoNet (Cayman) Inc. resolved to issue employee stock options with a total number of 1,235,388 units, each unit eligible to subscribe for one common share of EcoNet (Cayman) Inc. The options may be granted to qualified employees of EcoNet (Cayman) Inc. and its subsidiaries. The aforementioned units of employee stock options have been exercised in full as of December 31, 2017. The total numbers of outstanding stock options were 859,848 units as of December 31, 2016.

Subsidiaries Cash-settled Share-based Payment Transactions The Company acquired 51% shares of Richtek on October 7, 2015 and Richtek was included in the consolidated entities thereafter. On March 24, 2014, the Board of Directors of Richtek resolved to issue a cash-settled share-based payment plan (share appreciation rights plan). The options may be granted to certain qualified employees of Richtek and its domestic and foreign subsidiaries. The options are valid for three years and are exercisable at an accumulated percentage subsequent to the grant date. Richtek will pay the intrinsic value in cash once the employees exercise the options.

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Relevant information on share appreciation rights plan is disclosed as follows:

2014 Share appreciation right plan Grant date May 2, 2014 Total number granted (in thousand) 1,200 Contractual term 3 years Exercise price at grant date (NT$ / share) $ 174

The following table contains further details on the aforementioned share-based payment plan:

2017 2016 Weighted average Weighted average Unit exercise price Unit exercise price (in thousand) per share (NT$) (in thousand) per share (NT$) Outstanding at beginning of year 12 $ 195 916 $ 160 Granted - - - - Exercised (12) 195 (897) 195 Forfeited (Expired) - - (7) 160 Outstanding at end of year - - 12 195 Exercisable at end of year - 12

The abovementioned exercised price would be adjusted in accordance with the plan when Richtek issues stock dividends or distributes cash dividends.

Richtek’s shares were delisted on April 29, 2016 as all of its shares were acquired by Hsu-Si Investment at a price of NT$195 per share on that day. Based on Richtek’s revised share appreciation rights plan (approved by the Board of Directors of Richtek on November 9, 2015), effective from the day Richtek’s shares are delisted, Richtek will have to use the price of NT$195 to replace the exercise day closing price (as defined in the share appreciation rights plan) to calculate the intrinsic value of the rights and make payments to employees. Please refer to Note 6. (29) for relevant information for the merger with Richtek.

Share-based payment plans of Subsidiaries In August 2016, subsidiary Airoha was authorized by FSC to issue employee stock options with a total number of 2 million units, each unit eligible to subscribe for one common share of Airoha. On May 11, 2017, Board of Directors of Airoha resolved to revise the aforementioned share-based payment plans. Under the revised plan, Airoha would have to pay cash to settle all outstanding options in the case Airoha carries out a merger transaction and becomes a wholly owned subsidiary of an institutional shareholder. Therefore, there have been no outstanding stock options since July 27, 2017, the acquisition date. Please refer to Note 6. (29) for relevant information for the merger with Airoha.

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Share-based compensation expenses recognized for employee services received for the years ended December 31, 2017 and 2016 are shown in the following table: For the years ended December 31 2017 2016 Employee stock options $ 13,329 $ 14,929 Restricted stocks for employees 605,204 289,321 Share appreciation rights plan - 2,512 Total $ 618,533 $ 306,762

Except for the share-based payment plan of Airoha which was revised in the second quarter of 2017, the Company did not modify or cancel any share-based payment plans for the years ended December 31, 2017 and 2016.

(21) Sales For the years ended December 31 2017 2016 Sale of goods $ 260,583,467 $ 307,199,463 Other operating revenues 1,969,694 1,577,448 Less: Sales returns and discounts (24,336,843) (33,265,197) Net sales $ 238,216,318 $ 275,511,714

(22) Summary statement of employee benefits, depreciation and amortization expenses by function for the years ended December 31, 2017 and 2016: For the years ended December 31 2017 2016 Operating Operating Operating Operating Total Total costs expenses costs expenses Employee benefits expense Pension $ 28,889 $ 1,607,709 $ 1,636,598 $ 27,553 $ 1,561,048 $ 1,588,601 Others $ 686,744 $ 42,133,690 $ 42,820,434 $ 608,211 $ 41,092,759 $ 41,700,970 Depreciation $ 211,964 $ 3,346,058 $ 3,558,022 $ 169,808 $ 2,891,570 $ 3,061,378 Amortization $ 720 $ 3,651,607 $ 3,652,327 $ 951 $ 3,833,749 $ 3,834,700

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According to the Articles of Incorporation of MTK, no lower than 1% of profit of the current year is distributable as employees’ compensation and no higher than 0.5% of profit of the current year is distributable as remuneration to directors. However, MTK's accumulated losses shall have been covered (if any). MTK may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation in the form of shares or in cash; and in addition thereto a report of such distribution is submitted to the shareholders’ meeting. Information on the Board of Directors’ resolution regarding the employees’ compensation and remuneration to directors can be obtained from the “Market Observation Post System” on the website of the TWSE.

MTK accrued employees’ compensation and remuneration to directors based on a specific rate of profit of the year ended December 31, 2017. If the estimated amounts differ from the actual distribution resolved by the Board of Directors, MTK will recognize the change as an adjustment to income of next year. If the Board of Directors resolves to distribute employees’ compensation in stock, the number of shares distributed is determined by dividing the amount of bonuses by the closing price (after considering the effect of cash and stock dividends) of shares on the day preceding the Board of Directors’ meeting. A resolution was approved in a meeting of the Board of Directors held on March 23, 2018 to distribute NT$298,331 thousand and NT$43,799 thousand in cash as employees’ compensation and remuneration to directors, respectively. There were no material differences between the aforementioned approved amounts and the amounts charged against earnings in 2017.

A resolution was approved in a meeting of the Board of Directors held on March 22, 2017 to distribute NT$309,130 thousand and NT$42,661 thousand in cash as employees’ compensation and remuneration to directors, respectively. There were no material differences between the aforementioned approved amounts and the amounts charged against earnings in 2016.

(23) Other income For the years ended December 31 2017 2016 Interest income $ 2,553,755 $ 2,517,861 Dividend income 580,035 398,259 Rental income 123,528 79,751 Others 218,656 489,678 Total $ 3,475,974 $ 3,485,549

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(24) Other gains and losses For the years ended December 31 2017 2016 Losses on disposal of property, plant and

equipment $ (30,714) $ (15,778) Losses on disposal of intangible assets (450) (909) Gains (losses) on disposal of investments Non-current assets held for sale 5,123,575 - Available-for-sale financial assets 8,821,082 (96,624) Held-to-maturity financial assets - (16,497) Financial assets measured at cost 22,901 (1,000) Investments accounted for using the

equity method 1,496,172 308,804 Foreign exchange (losses) gains (436,976) 597,572 Impairment losses Available-for-sale financial assets (63,520) - Financial assets measured at cost (352,894) (71,172) Gains (losses) on financial assets at fair value

through profit or loss 289,693 (163,538) Losses on financial liabilities at fair value

through profit or loss - (12,087) Others (59,346) 15,555 Total $ 14,809,523 $ 544,326

(25) Finance costs For the years ended

December 31 2017 2016 Interest expenses on borrowings $ 939,344 $ 558,906

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(26) Components of other comprehensive income

For the year ended December 31, 2017：

Income tax relating to Other components of Other Reclassification comprehensive other comprehensive Arising during adjustments income, comprehensive income, the period during the period before tax income net of tax

Not to be reclassified to profit or loss: Remeasurements of the defined benefit plan $ 207,977 $ - $ 207,977 $ (35,356) $ 172,621 To be reclassified to profit or loss in subsequent periods: Exchange differences resulting

from translating the financial

statements of foreign operations (4,439,045) - (4,439,045) - (4,439,045) Unrealized gains (losses) from available-for-sale financial assets 19,543,561 (8,757,562) 10,785,999 (1,248,983) 9,537,016 Share of other comprehensive income of associates and joint ventures accounted for

using the equity method (7,559) - (7,559) - (7,559)

Total of other comprehensive income $ 15,304,934 $ (8,757,562) $ 6,547,372 $ (1,284,339) $ 5,263,033

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For the year ended December 31, 2016：

Not to be reclassified to profit or loss: Remeasurements of the defined benefit plan $ (65,079) $ - $ (65,079) $ 11,064 $ (54,015) To be reclassified to profit or loss in subsequent periods: Exchange differences resulting from translating the financial statements of foreign operations (4,504,523) - (4,504,523) - (4,504,523) Unrealized gains (losses) from available-for-sale financial assets 11,200,973 96,624 11,297,597 (1,172,986) 10,124,611 Share of other comprehensive income of associates and joint ventures accounted for using the equity method 125,345 - 125,345 - 125,345

Total of other comprehensive income $ 6,756,716 $ 96,624 $ 6,853,340 $ (1,161,922) $ 5,691,418

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(27) Income tax The major components of income tax expense are as follows: For the years ended December 31 2017 2016 Current income tax $ 4,950,291 $ 3,355,119 Deferred tax income (1,816,247) (219,062) Others 33,321 46,296 Income tax expense recognized in profit or loss $ 3,167,365 $ 3,182,353

Income tax recognized in other comprehensive income For the years ended December 31 2017 2016 Deferred tax expense: Remeasurements of the defined benefit plan $ 35,356 $ (11,064) Unrealized gains on available-for-sale financial

assets 1,248,983 1,172,986 Income tax relating to components of other comprehensive income $ 1,284,339 $ 1,161,922

A reconciliation between tax expense and the product of accounting profit multiplied by applicable tax rates is as follows: For the years ended December 31 2017 2016 Accounting profit before tax from continuing

operations $ 27,237,463 $ 27,212,885 Tax at the domestic rates applicable to profits

in the country concerned $ 8,574,283 $ 8,612,158 Tax effect of revenues exempt from taxation (1,077,754) (2,627,270) Tax effect of expenses not deductible for tax

purposes 87,084 10,639 Investment tax credits (340,454) (367,191) Tax effect of deferred tax assets/liabilities (5,105,032) (3,024,560) 10% surtax on undistributed retained earnings 906,327 634,503 Others 122,911 (55,926) Total income tax expense recognized in profit

or loss $ 3,167,365 $ 3,182,353

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For the year ended December 31, 2017 Recognized in Recognized other Charged Beginning in profit or comprehensive directly to Exchange Ending balance loss income equity differences balance Temporary differences Unrealized allowance for inventory obsolescence $ 1,082,302 $ 581,768 $ - $ - $ - $ 1,664,070 Allowance for sales returns and discounts 634,818 (84,652) - - - 550,166 Amortization of difference for tax purpose 131,323 12,693 - - - 144,016 Amortization of goodwill difference for tax purpose (1,606,069) 1,169,120 - - - (436,949) Unused tax losses 75,663 (39,282) - - - 36,381 Unused tax credits 257,236 19,014 - - - 276,250 Others (335,027) 157,586 (1,284,339) - - (1,461,780) Deferred tax income (expense) $ 1,816,247 $ (1,284,339) $ - $ - Net deferred tax assets $ 240,246 $ 772,154 Reflected in balance sheet as follows: Deferred tax assets $ 3,265,695 $ 3,898,877 Deferred tax liabilities $ (3,025,449) $ (3,126,723)

For the year ended December 31, 2016 Recognized in Recognized other Charged Beginning in profit or comprehensive directly to Exchange Ending balance loss income equity differences balance Temporary differences Unrealized allowance for inventory obsolescence $ 940,306 $ 141,996 $ - $ - $ - $ 1,082,302 Allowance for sales returns and discounts 609,665 25,153 - - - 634,818 Amortization of difference for tax purpose 34,450 96,873 - - - 131,323 Amortization of goodwill difference for tax purpose (1,406,191) (199,878) - - - (1,606,069) Unused tax losses 89,401 (13,738) - - - 75,663 Unused tax credits 200,114 57,122 - - - 257,236 Others 715,361 111,534 (1,161,922) - - (335,027) Deferred tax income (expense) $ 219,062 $ (1,161,922) $ - $ - Net deferred tax assets $ 1,183,106 $ 240,246 Reflected in balance sheet as follows: Deferred tax assets $ 2,997,362 $ 3,265,695 Deferred tax liabilities $ (1,814,256) $ (3,025,449)

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Integrated income tax information December 31, December 31, 2017 2016 Balance of the imputation credit account $ -(Note) $ 9,743,192

The actual creditable ratios for 2016 was 11.69%. For 2016, imputation credit ratio for individual stockholders residing in R.O.C. is half of the original ratio according to the Article 66-6 of Income Tax Act.

Note：On January 18, 2018, the Legislative Yuan passed amendments to the Income Tax Act that the imputation credit ratio will no longer be used.

MTK’s earnings generated prior to December 31, 1997 have been fully appropriated.

The assessment of income tax returns

As of December 31, 2017, the assessment of the income tax returns of MTK and its material subsidiaries are as follows: The assessment of income tax returns Notes MTK Assessed and approved up to 2015 (Notes 1 and 2) Subsidiary- MStar Semiconductor Inc. Assessed and approved up to 2014 Subsidiary- Hsu-Ta Investment Corp. Assessed and approved up to 2015 Subsidiary- Hsu-Si Investment Corp. Assessed and approved up to 2015 Subsidiary- Richtek Technology Corp. Assessed and approved up to 2015

Note 1: MTK has applied for administrative appeals of the tax returns of 2015, 2014, 2012, 2011, 2010, 2009 and 2008. MTK disagreed with the decision made in the tax assessment notices. The Company has paid in full the additional taxes assessed by the tax authorities.

Note 2: Ralink Technology Corp. has applied for administrative appeal of the tax return of 2013. MTK disagreed with the decision made in the tax assessment notices. The Company has paid in full the additional taxes assessed by the tax authorities.

(28) Earnings per share Basic earnings per share is calculated by dividing net profit for the year attributable to ordinary equity owners of the parent entity by the weighted average number of ordinary shares outstanding during the year.

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Diluted earnings per share is calculated by dividing the net profit attributable to ordinary equity owners of the parent entity by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

For the years ended December 31 2017 2016 A. Basic earnings per share Profit attributable to ordinary equity owners of the

parent (in thousand NT$) $ 24,332,604 $ 23,700,598 Weighted average number of ordinary shares

outstanding for basic earnings per share (share) 1,564,139,064 1,563,789,601 Basic earnings per share (NT$) $ 15.56 $ 15.16

B. Diluted earnings per share Profit attributable to ordinary equity owners of the

parent (in thousand NT$) $ 24,332,604 $ 23,700,598 Weighted average number of ordinary shares

outstanding for basic earnings per share (share) 1,564,139,064 1,563,789,601 Effect of dilution: Employees’ compensation-stock (share) 1,309,316 1,716,700 Employee stock options (share) (Note) 23,448 - Restricted stocks for employees (share) 7,380,348 1,330,974 Weighted average number of ordinary shares

outstanding after dilution (share) 1,572,852,176 1,566,837,275 Diluted earnings per share (NT$) $ 15.47 $ 15.13

Note: There were no dilutive employee stock options for the year ended December 31, 2016.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date the financial statements were authorized for issue.

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(29) Business combinations

The merger with Richtek Technology Corp. Subsidiary Hsu-Ta Investment Corp. established Hsu-Si Investment in September 2015. On September 7, 2015, the Board of Directors of Hsu-Si Investment approved a tender offer for shares of Richtek. The terms of the offer was NT$195 in cash for each common share of Richtek. Hsu-Si Investment completed the tender offer and paid NT$14,770,046 thousand in cash to acquire 51% of the shares of Richtek on October 7, 2015. On March 3, 2016, the extraordinary shareholders’ meeting of Richtek and the Board of Directors of Hsu-Si Investment (on behalf of its shareholders’ meeting) approved the share-swap agreement. Hsu- Si Investment would pay NT$195 in cash per share for the rest of 49% shares of Richtek. Consequently, the ownership interest in Richtek changed but control over it remained. The difference between the cash payment to the non-controlling shareholders’ common shares and the carrying amount of Richtek’s 49% shares was recorded in equity. On April 29, 2016, the share-swap date, Richtek was delisted from the TWSE and became a wholly owned subsidiary of Hsu-Si Investment.

Richtek is an international analog IC design company and its products are mainly applied to notebook, consumer end products, network communication devices, panel displays, etc. The Company is a global leader in IC design, with focus on wireless communications, digital media, etc., and a market leader in cutting-edge systems on a chip for wireless communications, HDTV, ODD, DVD and Blu-ray. Products of the Company and Richtek are applied in similar end applications and are highly complementary to each other. The merger would provide customers with greater convenience in sourcing, and create scale for the Group in enhancing overall competitiveness and performance.

The Company has measured the non-controlling interest of Richtek at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.

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The fair values of the identifiable assets and liabilities of Richtek as of the acquisition date were: Fair value recognized on the acquisition date Cash and cash equivalents $ 1,743,522 Current assets 5,598,331 Funds and investments 116,005 Property, plant and equipment 3,653,938 Intangible assets- patent, trademark and customer 3,935,255 relationship Other non-current assets 453,858 15,500,909

Current liabilities (2,758,580) Other non-current liabilities (48,120) (2,806,700) Fair value of identifiable net assets $ 12,694,209

Goodwill of Richtek is as follows: Amount Cash consideration $ 14,770,046 Add: non-controlling interest 6,220,162 Less: identifiable net assets at fair value (12,694,209) Goodwill $ 8,295,999

Cash flows on acquisition: Amount Net cash acquired from the subsidiary $ 1,743,522 Transaction costs attributable to cash paid (14,770,046) Net cash flow-out on acquisition $ (13,026,524)

The goodwill of NT$8,295,999 thousand was mainly the value of expected synergies arising from acquisition.

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The merger with ILI Technology Corp. Subsidiary MStar Semiconductor, Inc. (“MStar Taiwan”) established Mrise Tech. in July 2015. Further, on October 26, 2015, the extraordinary shareholders’ meeting of ILI Tech. and the Board of Directors of Mrise Tech. (on behalf of its shareholders) resolved to acquire and merge ILI Tech. at a price of NT$51 in cash for each common share of ILI Tech. After the merger, ILI Tech. would be dissolved and Mrise Tech. would be renamed ILI Tech. In April 2016, the merger was approved by the Ministry of Commerce of the People's Republic of China. In addition, on April 14, 2016, both companies’ Board of Directors approved the merger date to be June 1, 2016.

ILI Tech. is a TFT-LCD and LTPS driver IC design company. MStar Taiwan mainly engages in TV and monitors SoC business. After the merger, both companies can enhance their competitiveness by increasing scale of operations and integrating resources. In long term, the merger will bring in higher net equity and earnings per share.

The fair values of the identifiable assets and liabilities of ILI Tech. as of the acquisition date were: Fair value recognized on the acquisition date Cash and cash equivalents $ 1,236,304 Current assets 3,051,349 Property, plant and equipment 905,525 Intangible assets- patent, trademark and customer 96,915 relationship Other non-current assets 81,298 5,371,391

Current liabilities (1,788,459) Other non-current liabilities (4,541) (1,793,000) Fair value of identifiable net assets $ 3,578,391

Goodwill of ILI Tech. is as follows: Amount Cash consideration $ 3,642,682 Less: identifiable net assets at fair value (3,578,391) Goodwill $ 64,291

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Cash flows on acquisition: Amount Net cash acquired from the subsidiary $ 1,236,304 Transaction costs attributable to cash paid (3,642,682) Net cash flow-out on acquisition $ (2,406,378)

The goodwill of NT$64,291 thousand was mainly the value of expected synergies arising from acquisition.

If the combination had taken place on January 1, 2016, revenues and net income of the Company for the year ended December 31, 2016 would have been NT$278,643,064 thousand and NT$24,090,459 thousand, respectively.

The merger with Airoha Technology Corp. On February 10, 2017, the Board of Directors of subsidiary of Hsu-Si Investment approved a tender offer to acquire shares of Airoha. The terms of the offer was NT$110 in cash for each common share of Airoha. Hsu-Si Investment completed the tender offer and paid NT$2,665,368 thousand in cash to acquire 40% of the shares of Airoha and had control over it on March 14, 2017. The original 23% interest of Airoha acquired before the merger, recognized as investments accounted for using the equity method, was remeasured at fair value and the difference was recognized as a gain. In the same year, Hsu-Si Investment paid NT$110 in cash per share for the rest of 60% shares of Airoha. Consequently, the ownership interest in Airoha changed but control over it remained. The difference between the cash payment to the non-controlling shareholders’ common shares and the carrying amount of Airoha’s 60% shares was recognized under the equity.

Airoha is a domestic IC design company and specialized in the design and sale of highly integrated circuits for wireless communication. Its products are mainly applied to cell phones, digital TVs and set-top boxes, Bluetooth HID devices, audio accessories, and wearables. The Company is a global leader in IC design, with focus on wireless communications, digital media, etc., and a market leader in cutting-edge systems on a chip for wireless communications, HDTV, DVD and Blu-ray. Considering the Company’s expansion strategy of Internet of Things market, products of the Company and Airoha are applied in similar end applications and are highly complementary to each other. The merger would provide customers with greater convenience in sourcing, and create scale for the Group in enhancing overall competitiveness and performance.

The Company has measured the non-controlling interest of Airoha at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.

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The fair values of the identifiable assets and liabilities of Airoha as of the acquisition date were: Fair value recognized on the acquisition date Cash and cash equivalents $ 1,399,093 Current assets 1,532,639 Property, plant and equipment 115,200 Intangible assets – software, patent, and trademark 1,358,427 Other non-current assets 57,586 4,462,945

Current liabilities (1,050,070) Other non-current liabilities (16,113) (1,066,183) Fair value of identifiable net assets $ 3,396,762

Goodwill of Airoha is as follows: Amount Cash consideration (Note) $ 2,455,624 Fair value of equity interest in Airoha originally held 1,704,331 by the Company Add: non-controlling interest 1,276,173 Less: identifiable net assets at fair value (3,396,762) Goodwill $ 2,039,366 Note: Hsu-Si Investment acquired 37% of Airoha’s common shares from third parties by paying NT$2,455,624 thousand. In addition, Hsu-Si Investment paid NT$209,744 thousand to Hsu-Ta Investment Corp. to obtain 3% of Airoha’s common shares.

Cash flows on acquisition: Amount Net cash acquired from the subsidiary $ 1,399,093 Transaction costs attributable to cash paid (2,455,624) Net cash flow-out on acquisition $ (1,056,531)

The goodwill of NT$2,039,366 thousand was mainly the value of expected synergies arising from acquisition.

From the acquisition date to December 31, 2017, Airoha has contributed NT$5,670,418 thousand of revenue and NT$470,553 thousand of the net income to the Company.

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If the combination had taken place on January 1, 2017, revenues and net income of the Company for year ended December 31, 2017 would have been NT$239,059,191 thousand and NT$24,071,877 thousand, respectively.

(30) Non-current assets held for sale On May 13, 2016, the Company's Board of Directors approved to sell the shares of AutoChips Inc. (“AutoChips”) to NavInfo Co. Ltd., in the transaction price of approximately US$497 million. The Company then reclassified AutoChips’ assets and liabilities to non-current assets held for sale as a disposal group. Assets and liabilities reclassified to non-current assets held for sale as a disposal group as of December 31, 2016 mainly consisted of:

As of December 31, 2016 Non-current assets held for sale Cash and cash equivalents $ 788,258 Available-for-sale financial assets-current 1,012,974 Debt instrument investments for which no active 1,012,974 market exists-current Trade receivables, net 269,335 Other receivables 265,856 Inventories, net 196,038 Prepayments 29,664 Property, plant and equipment 47,197 Intangible assets 9,586 Refundable deposits 1,844 3,633,726

Liabilities directly associated with non-current assets

held for sale Trade payables (150,731) Trade payables to related parties (10,310) Other payables (424,202) Current tax liabilities (31,111) Other current liabilities (58,689) (675,043) Net carrying amount of the disposal group $ 2,958,683

The Company has transferred the shareholding rights of AutoChips and derecognized it in March 2017.

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(31) Changes in ownership interests in subsidiaries Changes in ownership of subsidiaries

Nephos (Hefei) Co. Ltd., Richnex Microelectronics Corp., E-Vehicle Semiconductor Technology Co., Ltd. and EcoNet (Cayman) Inc. increased its capital by cash for the year ended December 31, 2017, and the Company did not subscribe new shares in proportionate to its original ownership interest. Consequently, the ownership interest in the companies changed but control over these companies remained. The difference between the fair value of purchased equity investments and the increase in the non-controlling interest of NT$969,913 thousand was recorded in equity.

AutoChips and EcoNet (Cayman) Inc. increased its capital by cash in the year ended December 31, 2016, and the Company did not subscribe new shares in proportionate to its original ownership interest. Consequently, the ownership interest in both companies changed but control over both companies remained. The differences between the fair value of purchased equity investments and the increase in the non-controlling interest for the year ended December 31, 2016 was NT$99,948 thousand, which was recorded in equity.

7. Related Party Transactions Information of the related parties that had transactions with the Company during the financial reporting period is as follows:

Name and nature of relationship of the related parties

Name of the related parties Nature of relationship of the related parties Airoha Technology Corp. Associate (Note 1) Shenzhen Huiding Technology Co., Ltd. Associate (Note 2) King Yuan Electronics Co., Ltd. Substantive related party Andes Technology Corp. Substantive related party JMicron Technology Corp. Substantive related party (Note 3)

Note 1：Airoha was no longer an associate after the Company obtained control over it on March 14, 2017. Note 2：Shenzhen Huiding Technology Co., Ltd. became a listed company in Shanghai Stock Exchange on October 17, 2016. Investment in Shenzhen Huiding Technology Co., Ltd. accounted for using the equity method was reclassified to available-for-sale financial assets as the Company lost significant influence over it, and it was no longer an associate. Note 3：JMicron Technology Corp. reelected its chairman on June 2, 2016 and became a non-related party since that day.

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Significant transactions with the related parties

(1) IC testing, experimental services, and manufacturing technology services For the years ended December 31 2017 2016 Other related parties King Yuan Electronics Co., Ltd. $ 2,768,471 $ 3,709,590

The trade credit term for related parties and third-party customers were both 60 to 75 days.

(2) Consign research and development expenses and license expenses For the years ended December 31 2017 2016 Other related parties Andes Technology Corp. $ 28,307 $ 26,656

(3) Purchases For the years ended December 31 2017 2016 Associates Airoha Technology Corp. $ - $ 10,033

The trade credit term for associates was 30 days. The trade credit term for third-party customers was 30 to 60 days.

(4) Rental income For the years ended December 31 2017 2016 Associates Airoha Technology Corp. $ 2,831 $ 7,036 Shenzhen Huiding Technology Co., Ltd. - 10,138 Subtotal 2,831 17,174 Other related parties Andes Technology Corp. 578 535 JMicron Technology Corp. - 3,649 Subtotal 578 4,184 Total $ 3,409 $ 21,358

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NT$1,710 thousand were received from associates-Airoha Technology Corp. and was accounted for as deposits received due to a lease of office space for the year ended December 31, 2016.

(5) Other receivables from related parties December 31, December 31, 2017 2016 Associates Airoha Technology Corp. $ - $ 3,003

(6) Trade payables to related parties December 31, December 31, 2017 2016 Associates Airoha Technology Corp. $ - $ 1,187

Other related parties King Yuan Electronics Co., Ltd. 571,593 922,370 Total $ 571,593 $ 923,557

(7) Liabilities directly associated with non-current assets held for sale December 31, December 31, 2017 2016 Other related parties King Yuan Electronics Co., Ltd. $ - $ 10,310

(8) Key management personnel compensation For the years ended December 31 2017 2016 Short-term employee benefits (Note) $ 1,010,580 $ 883,232 Share-based payment 243,444 129,048 Post-employment benefits 4,195 4,643 Termination benefits - 1,972 Total $ 1,258,219 $ 1,018,895

Note: The compensation (including remuneration to directors) to key management personnel was determined by the Compensation Committee of MTK in accordance with individual performance and the market trends.

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8. Assets Pledged as Collateral The following table lists assets of the Company pledged as collateral: Carrying amount December 31, December 31, Assets pledged as collateral 2017 2016 Purpose of pledge Debt instrument investments for which $ 9,180 $ 9,180 Customs clearance no active market exists-current deposits Debt instrument investments for which 9,705 9,705 Lease execution deposits no active market exists-current Debt instrument investments for which 360 - Performance bond no active market exists-current Debt instrument investments for which - 3,152 Customs clearance no active market exists-noncurrent deposits Debt instrument investments for which 528 537 Customs clearance no active market exists-noncurrent deposits Debt instrument investments for which 117 118 Lease execution deposits no active market exists-noncurrent Debt instrument investments for which - 200,000 Project performance no active market exists-noncurrent deposits Debt instrument investments for which 39,000 - Court pledged no active market exists-noncurrent Debt instrument investments for which 24,234 24,157 Customs clearance no active market exists-noncurrent deposits Debt instrument investments for which 23,018 22,964 Land lease guarantee no active market exists-noncurrent Debt instrument investments for which 7,000 7,000 Land lease guarantee no active market exists-noncurrent Debt instrument investments for which 1,000 - Customs clearance no active market exists-noncurrent deposits Debt instrument investments for which 3,175 - Customs clearance no active market exists-noncurrent deposits Debt instrument investments for which 9,808 - Lease execution deposits no active market exists-noncurrent Property, plant and equipment - 331,050 427,962 Long-term borrowing buildings Property, plant and equipment - 331,506 336,578 Long-term borrowing buildings and land Investment Property-buildings 79,745 - Long-term borrowing Total $ 869,426 $ 1,041,353

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9. Contingencies and Off Balance Sheet Commitments (1) Operating lease commitments-the Company as lessee

The Company has entered into commercial lease contracts with terms of one to fifty years.

Future minimum rentals payable under non-cancellable operating leases are as follows:

December 31, December 31, 2017 2016 Not later than one year $ 585,929 $ 582,716 Later than one year but not later than five years 844,803 1,099,372 Later than five years 225,302 471,622 Total $ 1,656,034 $ 2,153,710

Operating lease expenses are as follows: For the years ended December 31 2017 2016 Minimum lease payments $ 830,791 $ 892,330

(2) Legal claim contingency A. Optical Devices, LLC (“Optical Devices”) filed a complaint with the U.S. International Trade Commission (the “Commission”) against MTK and subsidiary MediaTek USA Inc. on September 3, 2013 alleging infringement of United States Patent No. 8,416,651. Optical Devices alleged that MTK’s optical disc drive chips infringe its patent and sought to prevent the accused products from being imported into the United States. The Commission issued an Initial Determination on July 17, 2014 finding that Optical Devices failed to meet the domestic industry requirement and terminating the investigation. On September 3, 2014, the Commission vacated the Initial Determination and remanded the case for further proceedings. On October 20, 2014, the Commission issued an Initial Determination to terminate the investigation on the ground that Optical Devices’ lack of standing. On December 4, 2014, the Commission partially vacated the Initial Determination and remanded a part of the case including the investigation against MTK for further proceedings. On April 27, 2015, the Commission issued an Initial Determination terminate the investigation on the ground of Optical Devices’ lack of standing. The Commission issued notice to affirm the Initial Determination with modified reasoning and terminated the investigation on June 9, 2015.

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Also on September 3, 2013, Optical Devices filed a complaint in the United States District Court for the District of Delaware against MTK and subsidiary MediaTek USA Inc., alleging that MTK’s optical disc drive chips infringe the above referenced patent. The court dismissed the claims with prejudice against MTK and MediaTek USA Inc. pursuant to the parties’ joint motion on November 29, 2017.

B. Mariner IC Inc. (“Mariner”) filed a complaint in the United States District Court for the Eastern District of Texas against MTK and subsidiary MediaTek USA Inc. on April 25, 2016, alleging infringement of United States Patent Nos. 5,560,666 and 5,846,874. The court dismissed the claims with prejudice against MTK and MediaTek USA Inc. pursuant to the parties’ joint stipulation on May 17, 2017.

C. Semcon IP Inc. (“Semcon”) filed a complaint in the United States District Court for the Eastern District of Texas against MTK and subsidiary MediaTek USA Inc. on April 25, 2016, alleging infringement of United States Patent Nos. 7,100,061, 7,596,708, 8,566,627 and 8,806,247. The operations of MTK and subsidiary MediaTek USA Inc. would not be materially affected by this case.

D. ZiiLabs Inc. Ltd. (“ZiiLabs”) filed a complaint with the Commission against MTK and subsidiary MediaTek USA Inc. on December 16, 2016 alleging infringement of United States Patent Nos. 6,677,952, 6,950,350, 7,518,616, 8,643,659. The Commission issued an Initial Determination to terminate the investigation as to MediaTek USA Inc. on June 19, 2017. On August 28, 2017, the Commission issued an Initial Determination to terminate the investigation.

Also on December 16, 2016, ZiiLabs filed a complaint in the United States District Court for the Eastern District of Texas against MTK and subsidiary MediaTek USA Inc., alleging infringement of the above referenced patents. The court dismissed the claims with prejudice against MTK and MediaTek USA Inc. pursuant to the parties’ joint motion on August 10, 2017.

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E. Advanced Micro Devices, Inc. and ATI Technologies ULC (collectively “AMD”) filed a complaint with the Commission against MTK and subsidiary MediaTek USA Inc. on January 24, 2017 alleging infringement of United States Patent Nos. 7,633,506, 7,796,133, 8,760,454, and 9,582,846. The operations of MTK and subsidiary MediaTek USA Inc. would not be materially affected by this case.

F. On March 7, 2017, Broadcom Corporation (“Broadcom”) filed a complaint with the Commission against MTK and subsidiary MediaTek USA Inc. alleging infringement of United States Patent Nos. 8,284,844, 7,590,059, 7,310,104, and 7,342,967; and against subsidiary MStar Taiwan alleging infringement of United States Patent Nos. 8,284,844, 7,590,059, 8,068,171 and 7,310,104. The Commission issued an Initial Determination to terminate the investigation as to MTK, MediaTek USA Inc., and MStar Taiwan on November 29, 2017.

Also on March 7, 2017, Broadcom filed a complaint in the United States District Court for the Central District of California against MTK and subsidiary MediaTek USA Inc., alleging infringement of United States Patent Nos. 8,284,844, 7,590,059, 7,310,104, and 7,342,967; and against subsidiary MStar Taiwan alleging infringement of United States Patent Nos. 8,284,844, 7,590,059, 8,068,171, and 7,310,104. The court dismissed the claims with prejudice against MTK, MediaTek USA Inc., and MStar Taiwan pursuant to the parties’ joint stipulations on November 8, 2017.

G. Blue Sky Networks, LLC (“Blue Sky”) filed a complaint in the United States District Court for the Western District of Texas against MTK and subsidiary MediaTek USA Inc. on July 5, 2017, alleging infringement of United States Patent Nos. 6,088,398, 6,484,027, 6,865,372, 7,693,542, 7,885,684, 8,019,381, 8,265,691 and 8,346,169. The court dismissed the claims with prejudice against MTK and MediaTek USA Inc. on October 18, 2017.

H. Wireless Switch IP, LLC (“Wireless Switch”) filed a complaint in the United States District Court for the Northern District of California against MTK and subsidiary MediaTek USA Inc. on July 25, 2017, alleging infringement of United States Patent Nos. 7,356,351 and 7,647,070. The court dismissed the claims against MTK and MediaTek USA Inc. on October 5, 2017.

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I. Lucio Development LLC (“Lucio Development”) filed a complaint in the United States District Court for the Western District of Texas against subsidiary MediaTek USA Inc. on December 11, 2017, alleging infringement of United States Patent No. 7,069,546. The operations of MTK and subsidiary MediaTek USA Inc. would not be materially affected by this case.

The Company will handle these cases carefully.

10. Losses due to Major Disasters None

11. Significant Subsequent Events On January 18, 2018, the Legislative Yuan passed amendments to the Income Tax Act. The amendments raised the corporate income tax rate for companies from 17% to 20%. After the change of the tax rate, the deferred tax assets and deferred tax liabilities will be increased by NT$580,045 thousand and NT$135,176 thousand, respectively.

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12. Others (1) Financial instruments A. Categories of financial instruments Financial assets December 31, December 31, 2017 2016 Financial assets at fair value through profit or loss: Held for trading financial assets $ 27 $ 1,850 Financial assets designated upon initial recognition at fair value through profit or loss 5,340,886 6,965,745 Subtotal 5,340,913 6,967,595 Available-for-sale financial assets 37,637,472 28,343,391 Financial assets measured at cost 12,635,302 6,895,187 Loans and receivables: Cash and cash equivalents (excluding cash on hand and petty cash) 145,332,531 140,555,221 Debt instrument investments for which no active market exists 1,163,326 1,763,420 Trade receivables 16,895,396 20,480,806 Other receivables 21,251,357 5,497,925 Subtotal 184,642,610 168,297,372 Total $ 240,256,297 $ 210,503,545

Financial liabilities December 31, December 31, 2017 2016 Financial liabilities at fair value through profit or loss: Held for trading financial liabilities $ 18,144 $ 45,098 Financial liabilities at amortized cost: Short-term borrowings 64,315,682 54,523,984 Trade payables (including related parties) 23,584,452 24,630,117 Other payables 35,796,290 33,937,995 Long-term payables 1,726,364 - Long-term borrowings (including current portion) 373,042 419,086 Subtotal 125,795,830 113,511,182 Total $ 125,813,974 $ 113,556,280

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B. Fair values of financial instruments a. The methods and assumptions applied in determining the fair value of financial instruments: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used by the Company to measure or disclose the fair values of financial assets and financial liabilities:

(a) The carrying amount of cash and cash equivalents, trade receivables, other receivables, short-term borrowings, trade payables (including related parties) and other payables approximate their fair value due to their short maturities.

(b) For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (including listed equity securities and bonds) at the reporting date.

(c) The fair value of derivative financial instrument is based on market quotations. For unquoted derivatives that are not options, the fair value is determined based on discounted cash flow analysis using interest rate yield curve for the contract period. Fair value of option-based derivative financial instruments is obtained using the option pricing model.

(d) The fair value of other financial assets and liabilities is determined using discounted cash flow analysis; the interest rate and discount rate are selected with reference to those of similar financial instruments.

b. Fair value of financial instruments measured at amortized cost

The carrying amount of the Company’s financial assets and liabilities measured at amortized cost approximate their fair value.

c. Fair value measurement hierarchy

(a) Fair value measurement hierarchy All asset and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

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Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date.

Level 2: Input other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.

Level 3: Unobservable inputs for the assets or liabilities.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization at the end of each reporting period.

(b) Fair value measurement hierarchy of the Company’s assets and liabilities The Company does not have assets measured at fair value on a non-recurring basis; the following table presents the fair value measurement hierarchy of the Company’s assets and liabilities on a recurring basis:

As of December 31, 2017 Level 1 Level 2 Level 3 Total Financial assets: Financial assets at fair value through profit or loss Bonds $ 458,714 $ - $ 675,363 $ 1,134,077 Derivative financial instruments - 27 - 27 Linked deposits - 253,124 3,953,685 4,206,809 Available-for-sale financial assets Stocks 2,108,954 23,704,616 32,701 25,846,271 Bonds 3,687,075 - 3,998,034 7,685,109 Funds 3,161,143 - 944,949 4,106,092 Total $ 9,415,886 $ 23,957,767 $ 9,604,732 $ 42,978,385

Financial liabilities: Financial liabilities at fair value through profit or loss Derivative financial instruments $ - $ 18,144 $ - $ 18,144

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As of December 31, 2016 Level 1 Level 2 Level 3 Total Financial assets: Financial assets at fair value through profit or loss Bonds $ 464,598 $ - $ 646,029 $ 1,110,627 Derivative financial instruments - 1,850 - 1,850 Linked deposits - 2,047,501 3,807,617 5,855,118 Available-for-sale financial assets Depositary receipts 23,314 - - 23,314 Stocks 1,661,142 13,703,400 32,701 15,397,243 Bonds 5,496,637 - 2,306,190 7,802,827 Funds 4,330,073 - 789,934 5,120,007 Total $ 11,975,764 $ 15,752,751 $ 7,582,471 $ 35,310,986

Financial liabilities: Financial liabilities at fair value

through profit or loss Derivative financial instruments $ - $ 45,098 $ - $ 45,098

For the years ended December 31, 2017 and 2016, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.

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The detail movement of recurring fair value measurements in Level 3:

Reconciliation for recurring fair value measurements in Level 3 of the fair value hierarchy during the period is as follows:

Financial assets at fair value Available-for-sale through profit or loss financial assets Linked Bonds deposits Bonds Funds Stocks Total As of January 1, 2017 $ 646,029 $ 3,807,617 $ 2,306,190 $ 789,934 $ 32,701 $ 7,582,471 Amount recognized in profit or loss 36,939 59,741 7,008 28,639 - 132,327 Amount recognized in

OCI - - 67,287 - - 67,287 Amount recognized in OCI- exchange differences (7,605) (236,598) (97,203) (9,601) - (351,007) Acquisitions - 1,073,991 3,874,204 1,949,531 - 6,897,726 Settlements - (751,066) (2,159,452) (1,813,554) - (4,724,072) As of December 31, 2017 $ 675,363 $ 3,953,685 $ 3,998,034 $ 944,949 $ 32,701 $ 9,604,732

Financial assets at fair value Available-for-sale through profit or loss financial assets Linked Bonds deposits Bonds Funds Stocks Total As of January 1, 2016 $ 1,712,272 $ 4,923,666 $ 1,133,112 $ 1,249,090 $32,701 $9,050,841 Amount recognized in

profit or loss (28,492) (105,431) 3,076 26,762 - (104,085) Amount recognized in

OCI - - (16,021) - - (16,021) Amount recognized in OCI- exchange differences (38,350) (85,241) (22,113) (110,598) - (256,302) Acquisitions 697,002 1,704,723 1,789,158 2,416,270 - 6,607,153 Settlements (1,696,403) (2,630,100) (581,022) (1,778,616) - (6,686,141) Reclassified to noncurrent assets held for sale - - - (1,012,974) - (1,012,974) As of December 31, 2016 $ 646,029 $ 3,807,617 $ 2,306,190 $ 789,934 $32,701 $7,582,471

- 108 - WorldReginfo - 9eddffcf-d723-4d4c-9b79-21b3ad410d23 English Translation of Financial Statements Originally Issued in Chinese MEDIATEK INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (Amounts are expressed in thousands of New Taiwan Dollars unless otherwise stated)

Total gains (losses) related to bonds, funds and linked deposits on hand recognized for the years ended December 31, 2017 and 2016 amounted to NT$96,601 thousand and NT$(146,631) thousand, respectively.

Information on significant unobservable inputs to valuation of fair value measurements categorized within Level 3 of the fair value hierarchy

The significant unobservable inputs to valuations of recurring fair value measurements categorized within Level 3 of the fair value hierarchy are shown below:

As of December 31, 2017: Interrelationship Valuation Significant Quantitative between inputs Sensitivity analysis of the technique unobservable inputs information and fair value inputs to fair value Stock Market Price-Book ratio of 20.36~ The higher the 10% increase (decrease) in Approach similar entities 22.26 Price-Book ratio the Price-Book ratio of of similar entities, similar entities would result the higher the fair in an increase (decrease) in value estimated profit or loss by NT$1,740 thousand.

As of December 31, 2016: Interrelationship Valuation Significant Quantitative between inputs Sensitivity analysis of the technique unobservable inputs information and fair value inputs to fair value Stock Market Price-Book ratio of 28.32~ The higher the 10% increase (decrease) in Approach similar entities 29.63 Price-Book ratio the Price-Book ratio of of similar entities, similar entities would result the higher the fair in an increase (decrease) in value estimated profit or loss by NT$2,326 thousand.

The Company’s linked-deposits, convertible bonds, bonds and funds of the fair value hierarchy are based on unadjusted quoted price of trading partner. Therefore, the quantitative information and sensitivity analysis are not available.

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Valuation process used for fair value measurements categorized within Level 3 of the fair value hierarchy

The Company’s Finance Department is responsible for validating the fair value measurements and updating the latest quoted price of trading partner periodically to ensure that the results of the valuation are in line with market conditions, based on stable, independent and reliable inputs which are consistent with other information, and represent exercisable prices. The Department analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Company’s accounting policies at each reporting date to ensure the measurement or assessment are reasonable.

C. Fair value measurement hierarchy of the Company’s assets and liabilities not measured at fair value but for which the fair value is disclosed

As of December 31, 2017 Level 1 Level 2 Level 3 Total Financial assets not measured at fair value but for which the fair value is disclosed: Investment property $ - $ - $ 1,399,396 $ 1,399,396

As of December 31, 2016 Level 1 Level 2 Level 3 Total Financial assets not measured at fair value but for which the fair value is disclosed: Investment property $ - $ - $ 951,645 $ 951,645

D. Derivative financial instruments The Company’s derivative financial instruments held for trading was forward exchange contracts. The related information is as follows:

The Company entered into forward exchange contracts to manage its exposure to financial risk, but these contracts were not designated as hedging instruments. The table below lists the information related to outstanding forward exchange contracts:

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Forward exchange Contract amount contracts Currency (’000) Maturity As of December 31, 2017 CNY to USD Buy USD 39,712 January 2017 As of December 31, 2017 CNY to USD Sell USD 1,000 January 2017 As of December 31, 2016 TWD to USD Sell USD 220,000 January 2016 As of December 31, 2016 TWD to USD Sell USD 40,000 February 2016

The Company entered into forward foreign exchange contracts to hedge foreign currency risk of net assets or net liabilities. As there will be corresponding cash inflows or outflows upon maturity and the Company has sufficient operating funds, the cash flow risk is insignificant.

(2) Financial risk management objectives and policies The Company’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activities. The Company identifies, measures and manages the aforementioned risks based on the Company’s policy and risk tendency.

The Company has established appropriate policies, procedures and internal controls for financial risk management. The plans for material treasury activities are reviewed by Board of Directors and Audit Committee in accordance with relevant regulations and internal controls. The Company complies with its financial risk management policies at all times.

A. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in market prices. Market prices comprise foreign currency risk, interest rate risk and other price risk.

In practice, it is rarely the case that a single risk variable will change independently from other risk variables; there are usually interdependencies between risk variables. However the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

a. Foreign currency risk The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense are denominated in a different currency from the Company’s functional currency) and the Company’s net investments in foreign subsidiaries.

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The Company reviews its assets and liabilities denominated in foreign currency and enters into forward exchange contracts to hedge the exposure from exchange rate fluctuations. The level of hedging depends on the foreign currency requirements from each operating unit. As the purpose of holding forward exchange contracts is to hedge exchange rate fluctuation risk, the gain or loss made on the contracts from the fluctuation in exchange rates are expected to mostly offset gains or losses made on the hedged item. Hedge accounting is not applied as they did not qualify for hedge accounting criteria. Furthermore, as net investments in foreign subsidiaries are for strategic purposes, they are not hedged by the Company.

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the Company’s profit is performed on significant monetary items denominated in foreign currencies as of the end of the reporting period. The Company’s foreign currency risk is mainly related to the volatility in the exchange rates for USD. The information of the sensitivity analysis is as follows:

When NTD appreciates or depreciates against USD by 0.1%, the profit for the years ended December 31, 2017 and 2016 decreases/increases by NT$1,662 thousand and NT$4,860 thousand, while equity decreases/increases by NT$78,448 thousand and NT$32,213 thousand, respectively.

b. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s loans and receivables at variable interest rates, bank borrowings with fixed and variable interest rates. Moreover, the market value of the Company’s investments in credit-linked deposits and interest rate-linked deposits are affected by interest rate. The market value would decrease (even lower than the principal) when the interest rate increases, and vice versa. The market values of exchange rate-linked deposits are affected by interest rates and changes in the value and volatility of the underlying. The following sensitivity analysis focuses on interest rate risk and does not take into account the interdependencies between risk variables.

The interest rate sensitivity analysis is performed on items exposed to interest rate risk as of the end of the reporting period, including investments and bank borrowings with variable interest rates. At the reporting date, an increase/decrease of 10 basis points of interest rate in a reporting period could cause the profit for the years ended December 31, 2017 and 2016 to increase/decrease by NT$6,545 thousand and NT$11,188 thousand, respectively.

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c. Other price risk The Company’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company’s listed equity securities are classified under available-for-sale financial assets (including financial assets measured at cost). The Company manages the equity price risk through diversification and placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company’s senior management on a regular basis. The Company’s Board of Directors reviews and approves certain equity investments according to level of authority.

A change of 1% in the price of the listed equity securities classified under available- for-sale could cause the other comprehensive income for the years ended December 31, 2017 and 2016 to increase/decrease by NT$289,747 thousand and NT$196,146 thousand, respectively.

Please refer to Note 12. (1) B for sensitivity analysis information of other equity instruments or derivatives that are linked to such equity instruments whose fair value measurement is categorized under Level 3 of the fair value hierarchy.

B. Credit risk management Credit risk is the risk that counterparty will not meet its obligations under a contract, leading to a financial loss. The Company is exposed to credit risk from operating activities (primarily for trade receivables) and from its financing activities, including bank deposits and other financial instruments.

Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and controls relating to customer credit risk management. Credit limits are established for all customers based on their financial position, rating from credit rating agencies, historical experience, prevailing economic condition and the Company’s internal rating criteria, etc. Certain customer’s credit risk will also be managed by taking credit enhancing procedures, such as requesting for prepayment.

As of December 31, 2017 and 2016, receivables from top ten customers represented 42.78% and 37.58% of the total trade receivables of the Company, respectively. The credit concentration risk of other accounts receivables was insignificant.

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The Company’s exposure to credit risk arises from potential default of the counter-party or other third-party. The level of exposure depends on several factors including concentrations of credit risk, components of credit risk, the price of contract and other receivables of financial instruments. Since the counter-party or third-party to the foregoing forward exchange contracts and cross currency swap contracts are all reputable financial institutions, management believes that the Company’s exposure to default by those parties is minimal.

Credit risk of credit-linked deposits, interest rate-linked deposits, exchange-linked deposit, index-linked deposit and convertible bonds arises if the issuing banks breached the contracts or the debt issuer could not pay off the debts; the maximum exposure is the carrying value of those financial instruments. Therefore, the Company minimized the credit risk by only transacting with counter-party who is reputable, transparent and in good financial standing.

C. Liquidity risk management The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash and cash equivalents, highly liquid equity investments and bank borrowings. The table below summarizes the maturity profile of the Company’s financial liabilities based on the contractual undiscounted payments and contractual maturity. The payment amount includes the contractual interest. The undiscounted payment relating to borrowings with variable interest rates is extrapolated based on the estimated interest rate yield curve as of the end of the reporting period.

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Non-derivative financial instruments Less than 1 year 1 to 5 years Less than 5 years Total As of December 31,

2017 Short-term borrowings $ 64,451,953 $ - $ - $ 64,451,953 Trade payables (including related parties) 23,584,452 - - 23,584,452 Other payables 35,719,573 - - 35,719,573 Long-term borrowings 42,235 232,037 121,574 395,846 Long-term payables - 1,726,364 - 1,726,364 Total $ 123,798,213 $ 1,958,401 $ 121,574 $ 125,878,188

As of December 31,

2016 Short-term borrowings $ 54,581,331 $ - $ - $ 54,581,331 Trade payables (including related parties) 24,630,117 - - 24,630,117 Other payables 33,913,282 - - 33,913,282 Long-term borrowings 24,755 292,370 126,129 443,254 Total $ 113,149,485 $ 292,370 $ 126,129 $ 113,567,984

Derivative financial instruments Less than 1 year 1 to 5 years Total As of December 31, 2017 Gross settlement Forward exchange contracts Inflow $ 1,185,335 $ - $ 1,185,335 Outflow (1,206,415) - (1,206,415) Net $ (21,080) $ - $ (21,080)

As of December 31, 2016 Net settlement Forward exchange contracts $ (47,710) $ - $ (47,710)

The table above contains the undiscounted net cash flows of derivative financial instruments.

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(3) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies is listed below: December 31, 2017 Foreign Currency (thousand) Exchange rate NT$ (thousand) Financial assets Monetary item: USD $ 4,377,407 29.848 $ 130,656,838 CNY $ 1,867,940 4.587 $ 8,440,931 Non-monetary item: USD $ 1,401,158 29.848 $ 41,821,776 CNY $ 1,593,359 4.587 $ 7,308,947

Financial liabilities Monetary item: USD $ 3,094,624 29.848 $ 92,368,322 CNY $ 1,440,467 4.587 $ 6,607,609

December 31, 2016 Foreign Currency (thousand) Exchange rate NT$ (thousand) Financial assets Monetary item: USD $ 4,445,288 32.279 $ 143,489,389 CNY $ 895 4.647 $ 4,163 Non-monetary item: USD $ 896,434 32.279 $ 28,935,990 CNY $ 1,548,281 4.647 $ 7,194,350

Financial liabilities Monetary item: USD $ 3,511,854 32.279 $ 113,359,152 CNY $ 112 4.647 $ 520

Functional currencies of entities of the Company are varied. Accordingly, the Company is not able to disclose the information of exchange gains and losses of monetary financial assets and liabilities by each significant asset and liability denominated in foreign currencies. The foreign exchange (loss) gain was NT$(436,976) thousand and NT$597,572 thousand for the years ended December 31, 2017 and 2016, respectively.

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(4) Capital management The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

13. Segment Information (1) General information The major sales of the Company come from multimedia and mobile phone chips and other integrated circuit design products. The chief operating decision maker reviews the overall operating results to make decisions about resources to be allocated to and evaluates the overall performance. Therefore, the Company is aggregated into a single segment.

(2) Geographical information A. Sales to other than consolidated entities For the years ended December 31 2017 2016 Taiwan $ 24,064,375 $ 20,378,650 Asia 212,721,800 252,271,020 Others 1,430,143 2,862,044 Total $ 238,216,318 $ 275,511,714

Sales are presented by customers’ country.

B. Non-current assets December 31, December 31, 2017 2016 Taiwan $ 86,622,095 $ 84,847,639 Asia 26,484,190 23,725,364 Others 890,037 1,085,425 Total $ 113,996,322 $ 109,658,428

(3) Major customers There were no sales to customers representing over 10% of the Company’s consolidated net sales for the years ended December 31, 2017 and 2016.

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